The insurance imperative in the energy transition
The global energy transition is no longer a distant aspiration—it’s a necessity. Discussions at COP30 highlighted how temperatures are very likely to overshoot the 1.5°C goal within the next decade. “To achieve net zero by 2050, renewable energy will demand $9.2 trillion of investment, with an additional $7 trillion needed to support the rapid growth of AI-driven data centers”, Fraser McLachlan, Chairman, Tokiomarine GX (TMGX).
“To achieve net zero by 2050, renewable energy will demand $9.2 trillion of investment, with an additional $7 trillion needed to support the rapid growth of AI-driven data centers”
Fraser McLachlan | Chairman, TokioMarine GX (TMGX)
Against this backdrop, renewable energy is surging forward, but have we yet reached generation renewables?
Global power demand is projected to rise by 4% annually for the next decade[1] and according to the United Nations, global natural resource consumption is forecast to rise 60% by 2060, compared with 2020 levels.
A growing population, electrification of industrial processes, and the exponential growth of data centers are all among the top contributors driving the need for power.
"AI-driven power consumption from data centers is the major watchword and is expected to grow by a conservative 15% each year until the end of the decade, according to the IEA. Rising project activity also has created a $1.6 trillion investment pipeline of data center construction projects” Francesca Gregory, Senior Energy Transition Analyst, GlobalData Energy Team.
“AI-driven power consumption from data centers is the major watchword and is expected to grow by a conservative 15% each year until the end of the decade, according to the IEA. Rising project activity also has created a $1.6 trillion investment pipeline of data center construction projects”
Francesca Gregory | Senior Energy Transition Analyst, GlobalData Energy Team
To supply this growing demand, renewable energy technologies are evolving and diversifying:
But despite the significant progress, coal and gas net capacity continues to increase, though more modestly than renewable technologies. Gas currently exceeds the capacity coming online for hydropower and offshore wind combined, underscoring the complexity of the transition.
Renewables have maintained a price advantage over fossil fuels, even as project costs rise[2]. In 2024 alone, the 169 GW of battery energy storage systems (BESS) capacity deployed represented a 90% price drop since 2010[2], reflecting how insurance markets can move forward and normalize technologies. Innovation is absolutely possible, but as renewable technologies continue to evolve at a rapid pace—achieving better efficiencies and innovative solutions to key challenges—the pace of change in insurance and risk management largely lags behind the speed of technological adoption.
Unlike oil and gas with decades of benchmarking and loss histories, renewable underwriting practices are constantly under pressure to keep pace with technological innovation.
Key challenges include:
To unlock the $16+ trillion of investment needed for renewables and AI infrastructure, insurers are under pressure to:
Ireland offers a glimpse of the future: 90 data centers already consume 20% of national electricity, backed by $20 billion in investment. Without insurance, such growth would be impossible.
A forward-thinking insurance industry is critical for a green energy transition and key insurers are stepping up.
In our recent Global Renewable Energy Conference 2025, platinum sponsor TMGX showcased their umbrella solution for green initiatives—a shift toward thinking of risk as a portfolio rather than silos and creating risk transfer efficiencies. Turning the multi-line insurance model around is a refreshing step forward. Alongside other solutions such as diamond sponsor AXA XL’s performance insurance—which provides a financial backstop for financiers against technology non-performance risk and supporting debt servicing—pockets of innovation are enabling renewable energy projects to move forward.
But the pace of innovation remains inconsistent. Some low-carbon projects continue to struggle to access affordable coverage, slowing deployment.
While progress is being made, solutions are not yet fully optimized, with major gaps in capacity, product design, risk modelling and affordability. “We need better dialogue between the insurance and financial markets to work with transparency as a unit, rather than in silos”, says Fraser McLachlan. Specialist brokers have a critical role in bringing financiers, insurers, project developers, regulators and other stakeholders together to innovate new, practical and effective solutions.
Alongside from placing renewable energy risks in the insurance markets, brokers play a pivotal role in driving innovation by:
Insurance brokers are not just risk managers, they are enablers of the renewable energy economy, ensuring that capital, coverage, and innovation converge to drive the green transition forward.
We are close to Generation Renewables, forecast for 2033, but the goalposts continue to move. Renewables can tackle 80% of emissions, with carbon capture and storage (CCS), hydrogen, and biofuels addressing the rest. Yet, the insurance industry’s evolution is critical to sustaining the momentum. The question isn’t whether renewables will dominate the global energy mix—it’s how successfully insurers, brokers, financiers, regulators and other key stakeholders can align and enable innovation at pace.
For those who achieve the balance, the energy transition is a once-in-a-generation opportunity to lead—not follow—the green revolution.
To find out how natural resources companies can harness the specialist insights of sector-focused brokers to work with insurance markets effectively, contact our team.
