Willis warns of further rate reductions in $2 billion renewables market

(The Insurer) - A report by Willis has warned of further softening ahead in the renewable energy insurance market, where global annual premiums now total around $2 billion, in line with the more established oil, gas and chemicals sector.

The broker said 10% year-on-year rate reductions were now available in the renewables space, with downward pricing pressure expected to continue for the remainder of 2025 and into 2026.

"New capacity is entering the renewable energy sector from the traditional construction, power and utility, oil and gas, and marine markets as insurers seek to remain relevant with their historical client base or achieve progression towards and adherence to their own ESG objectives," the report said.

Willis said the market remains awash with proportional supporting capacity, with offered capacity regularly exceeding required levels.

"This could impact profitability for insurers on a longer-term horizon as they compete to win business by lowering pricing," the report said.

"This is indicative of a softening market which has not found its level yet, with the larger technical and capacity leading markets frequently taking the first bites of the bait ball that is renewable energy," Willis said.

"With cautious and managed reductions still appearing attractive, the surplus of proportional markets will find it increasingly difficult to gain traction and secure meaningful seats at the table. This has the potential to create an environment in H2 2025 onwards where capacity markets may be required to offer improved differential pricing to technical leaders to secure opportunities, further softening overall rates."

It added that insurers remain cautious following persistent natutral catastrophe losses, which continue to heavily influence the performance of individual underwriting years.

Markets "remain alive" to the challenges of securing appropriate rate for severe nat cat risks, both by location and reinsurance pricing.

Notable claims trends affecting the renewable energy industry include blade failures and subsea cable faults in the offshore wind sector, with the latter accounting for 83% of all offshore wind-related financial losses and insurance claims.

Onshore solar and wind projects also face extreme weather threats from wildfires, hail and storm damage. Onshore wind turbines also face similar high-profile technology failures, outages and business interruption claims as a result of design flaws, defective components from sub-contractors and lack of clear standardisation during the installation and commissioning phases.

The report added that, regionally, Asia leads in renewable development, contributing 72% of new global capacity in the last decade to account for 53.6% of the global share. This is driven by rising energy demand, ambitious net-zero targets and the increasing cost-competitiveness of clean technologies.