JOHN RAE: If you are not risk aware and have an adequate strategy, you may be uninsurable in five years' time.
TIM COTTON: So there's a real monumental shift to go to renewable energy, isn't there?
JOHN RAE: There's absolutely huge, huge task ahead of us, but I'm very excited to be involved in the transition to a clean future.
TIM COTTON: Hello, and welcome to our WTW podcast, A Smarter Way to Risk Down Under in Australasia edition, a series where we analyse and dissect a range of local and global complex risk topics and how we at WTW are committed to delivering the best outcomes for clients through managing risk in a smarter way. I'm your host Tim Cotton. And throughout this series, I'm going to bring in a variety of my WTW colleagues here in Australasia who have expertise and specialism in different areas of risk who will all provide their own perspective on what a smarter way to risk means to them and their area of the business.
Now I'm thrilled to have with me today John Rae, our renewable energy leader here in Australasia. Welcome, John, it's great to have you join me today.
JOHN RAE: Thanks, Tim, pleasure to be here.
TIM COTTON: Now John after getting to know you over the years outside of us having very different accents, which I'm sure our listeners will hear shortly, there's one thing that we've got in common. And there's one thing we don't have in common. And I'll start with the thing in common is that we both have young families and have newborn babies that I think are almost identical on the date they were born.
They're only in their very new days in being in this world. But that thing we have in common is that we walk into the office and give each other that look. And it's almost like, yeah, the nod of the head. We haven't had any sleep. No, you haven't either. And that's just that nod you've got to give to each other. And you're like, yeah, it's been a rough night and nothing else needs to be said. So I'd say that's one area we're very similar in.
One side that we don't share in common is that I'm quite self-confessed uneducated when it comes to renewable energy. And I'm doing my best every day to learn more about it. So this is certainly one of the reasons why I've brought you in today because you're someone that's got a high level of knowledge and expertise in this space. And I'm really looking forward to picking your brain a bit today to learn more about it.
First of all, John, for those listeners that might not know much about you, could you tell us a bit about yourself, your role at WTW, and what your area of the business specialises in for clients.
JOHN RAE: Sure, Tim. So I am the Australasian renewable energy practice leader. So what that means is that anything and everything renewable energy in Australia and New Zealand, I'm involved in some way, shape, or form. At WTW, we like to specialise in certain industries and really truly understand what the risk profile is for that type of industry. And as such, renewable energy has been a huge passion of mine for at least 7 to 10 years plus.
So this is a huge area where I really love to work in every single day and to be involved in and specialise in. And like you're saying with being an expert, I don't regard myself as an expert. I'm constantly learning. The industry is constantly adapting. And keeping on top of the trends is always hard. But that's what I try my best to do every single day.
TIM COTTON: Yeah, well, guess we're never the master of anything, are we? We always can learn and get better with things. But yeah, I've heard you talk at a few events, John. You're certainly impressive and know your stuff. So don't sell yourself too short there. But that sounds really interesting what you're doing for clients and, obviously, valuable at the moment. We know Australia's coal fleet are shutting down in the future with all the new government legislation. So there's a real monumental shift to go to renewable energy, isn't there?
JOHN RAE: There's absolutely huge, huge task ahead of us. But I'm very excited to be involved in the transition to a clean future.
TIM COTTON: So John, we know WTW have some outstanding data and analytics capabilities. How do we use these to our advantage to make better informed decisions for our clients?
JOHN RAE: Well, we're very lucky to have a very a global team that are able to analyse risk to a great degree, especially when it comes to highly exposed projects, for instance, in high natural catastrophe exposure regions. So we use these engineering specialists globally to be able to analyse the risk for each projects and then be able to buy insurance smartly.
If you can't truly understand what your risk is, you may be overpaying for insurance. You may be inefficient in your buying process. And you may not truly be able to mitigate your risks. So being able to analyse your risks well and truly understand what your risk profile is, means that you will be the most sophisticated buyer when it comes to insurance process.
TIM COTTON: And that leads me to my next question, John, because we do ask the hard hitting questions on this podcast, which is quite simply what does a smarter way to risk mean to you and your clients?
JOHN RAE: Well, I've been discussing this with a lot of clients and prospects recently, talking about where the renewable energy industry is now and where it needs to be in 5 to 10 years' time. The projects, and the clients, and the prospects that do the best are the ones that truly understand their risk profile and the ones that can truly articulate what their strategy is for the next 5 to 10 years.
If you go to a lot of renewable energy companies who I'd say haven't had the experience in the insurance process or don't truly understand the drivers for the insurance market, they are taking along on a journey. They are not controlling their journey. So having an adequate strategy and also truly planning the process to work towards a sophistication in your risk management process is absolutely key to being successful.
As we have seen that the market is deteriorating quite badly because there has been such a wide array of different issues with the industry, defects, natural catastrophe events, even just down to the smallest, a truck reversing into a blade. The simplest things that do cost a lot of money and time to repair that has been decimated in the insurance market. So we've seen a number of insurers pull out of the industry. So now, we have to help our clients and prospects get to the level of sophistication to truly understand their risks and then learn to work with them to create a risk mitigation strategy.
So at the end of the day, I have the easiest job as a broker being able to sell a client who truly understands risks and understands how the insurance market is driven. So it's in my interest to make my clients and prospects lives easier.
TIM COTTON: You mentioned natural catastrophe there. And we're pretty fortunate in Melbourne that we generally, albeit quite cold, we get pretty good weather most of the time. But yeah, some of those other states in New South Wales and Queensland have had a bad run in the last couple of years, haven't they?
JOHN RAE: Yeah, there's been some really bad flooding that's been affecting quite badly. But I mean, nowhere in Australia is completely safe from natural catastrophe because-- Victoria still has huge bushfire risk, which is one of the biggest concerns for insurers for the next couple of years. We've had a number of years of wet weather patterns, which has reduced that risk. Now we're getting into the bushfire exposure time. So working with projects to truly understand what their bushfire exposure is and to mitigate them effectively and carefully will be key to being able to get the most amount of coverage when it comes to bushfires because we are seeing sublimits now for bushfire risk.
TIM COTTON: I can still remember clearly Black Saturday in Victoria, which is probably coming up to 15 years ago now, how devastating that was. And yeah, it's not going to go away any time soon, bushfires. So it's certainly always going to be on the radar. That's for sure. John, I said from the outset that we both have young families, which explains the reason for the bags under both of our eyes, even though the listeners can't see that at the moment.
But I think your bags might be slightly bigger for a reason that you always seem to be on late night calls with our global colleagues. Could you tell us a bit about that global network that we have and how we leverage this to get the best outcomes for clients?
JOHN RAE: Of course, so we work in what's called lines of business or global lines of business, which allow us to be able to work together globally seamlessly. So as a consequence, I talk to my counterparts in London, which is one of the insurance capital of the world more often than I do people locally in Melbourne. The reason for that is that pretty much all of the projects that I am involved in will need now or in the future capacity from London or even from Singapore as well in Asia.
So being a globally connected broker is absolutely key to being successful. In a recent project, we actually placed 98% of that project in London. And that was because the local market wasn't as competitive as London was. And for us, it doesn't matter where the project is placed. We are completely placement agnostic. We always look for what is the best deal for our clients.
And I think that is an absolute key message that we really want to be getting out is that to get the best results, you need to travel. You need to be able to access markets globally and be able to create those connections globally with specialists all over the world. And it's absolutely key to moving back to the strategy is having that strategy about how to access that markets. It is very difficult to create a relationship with underwriters in London who are a global specialist, if you don't go and see them.
So actually going and seeing them, seeing the whites of their eyes and getting them to truly understand that you understand risk and you've accurately mitigated for your risk is absolutely key to getting a successful placement continuously into the future. Because at the end of the day, we, as brokers want to be creating that competitive tension to be able to get you the best results and get you the most efficient programs.
TIM COTTON: Yeah, and I guess every risk would be unique. Sometimes, locally would be best. And sometimes, globally would be best. So you don't know unless you ask a bit. And you're in a unique position as well, John, because you sit-in both the construction global line of business and the natural resources one, as well, don't you?
JOHN RAE: Yes, exactly. So because renewable energy is a very particular risk and needs a specialist who can truly understand the life cycle of a project, we, as brokers in the Renewable Energy Team at WTW, work across the entire life cycle of a project. So we work with what we call it the cradle to grave solution. So we work in the pre-construction, construction, operations, all the way through to decommissioning.
And we are specialist at all of those, which shows a real multifaceted skill set, which a lot of our competition doesn't have. And I think that's what really sets us apart is that we completely specialise in this industry. We don't dabble. I purely work on renewable energy. And I truly understand the risk profile that is associated with it.
Obviously, it's still a learning process. And everything's changing all the time. Risks are evolving. And we've got to evolve with it. But that's why you need industry specialisation. It's not like other industries, which stay the same for year on year on year. We have to adapt. We have to move with the times. We have to move with the transition. The transition is moving so fast. We need to move with it.
TIM COTTON: So John, what would you say are some of the emerging risks that you see coming in 2024 and beyond for renewable energy?
JOHN RAE: The biggest risk is uninsurability. The industry has been, unfortunately, performing quite poorly in regard to claims. What we call that is a negative claims ratio. So the money going into insurers versus the money going out is distorted. So we're seeing multiple insurers losing money. And as a consequence, they have to rectify their books, which means through higher premiums, lower coverage, higher deductibles.
So what is now becoming the norm is that if you are not risk aware and have an adequate strategy, you may be uninsurable in five years' time. If you have poorly performing assets that are continuously having claims, which some are preventable through poor risk management, poor workmanship, or cutting corners, you will really struggle at getting insurance in the future. We also see that there's, with the prevalence of the transition to renewable energy, that there's huge localisation of large, large amounts of projects means that there's huge risks in those areas, which will lead to sublimiting of certain coverages because of accumulation issues.
So what we say to our clients in that situation is how are you going to differentiate yourselves? We can help you on that path to differentiate yourselves to make sure you get the maximum amount of capacity for your projects, and making sure you work with the insurance market, and work with the insurers and the underwriters to ensure you get the best outcomes. Because if you don't do that, then you may get to the stage where you're completely uninsurable.
TIM COTTON: That word, uninsurable, sounds pretty scary. So I'm sure that's a big wake up call for any business to get everything in order for themselves. That's all we have time for today, John. It was great chatting to you. It's always a pleasure. I really appreciate those insights that you provide.
And I'm sure our listeners have, as well. I know I've certainly learnt a lot from this chat. And I'll listen back to it again afterwards. Did you enjoy being here?
JOHN RAE: I absolutely loved it, mate. Loved it.
TIM COTTON: That's all we have time for today. So Thanks again. And it's bye for now.
JOHN RAE: Thank you, Tim.
TIM COTTON: If you'd like to hear the remainder of our smarter way to risk podcast series, we encourage you to stay tuned on our WTW website. Follow us on LinkedIn, and listen to our latest content wherever. You listen to your podcasts.
