LONDON, September 08, 2022 – Risk managers in the power sector must tackle an entirely new risk landscape brought about by the Russia-Ukraine conflict, global inflation, the energy transition, and climate change, according to the 2022 Power Market Review from WTW (NASDAQ: WLTW).
As power insurance prices continue to rise, risk managers must juggle these risks while ensuring that they have determined current, correct, and sufficient asset and business interruption valuations against the backdrop of rampant global inflation, a challenge which some have not yet faced over the course of their careers.
The Review highlights these and other new challenges for the power sector, which range from the technological to the geopolitical. It considers:
Power Market Review also considers the current state of the insurance market for power risks. Data and commentary covers areas including:
Graham Knight, WTW’s Global Head of Natural Resources, said: “One issue above all is of immediate concern to our clients: determining correct asset and business interruption values. Our message to the industry on this topic is quite simple: it is vital that a more transparent understanding of how insured values are calculated is communicated from buyer to broker to insurer. When this is achieved, buyers will see greater price stability. Better valuations will reduce the likelihood of repeating the large price swings between hard- and soft-market conditions that we’ve experienced so often in the past.
“In the meantime,” Knight continued, “power insurance markets continue to harden still further, for two fundamental reasons. First, the sector still suffers from a disappointing loss record. Second, the pool of leading insurers remains relatively limited compared to previous underwriting eras. The following market is generally more willing to accept their terms, but momentum is insufficient to reverse the market’s overall upwards rating trend.”
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