Power Market Review 2022

Welcome to this year’s WTW Power Market Review. The impact of COVID-19 may have finally begun to recede, but we are now living in a more uncertain world than ever, given the current geopolitical atmosphere, energy prices, supply chain disruptions and, of course, climate change. As the power industry faces up to these uncertainties, there are really no easy ways to navigate the transformed risk landscape confronting the industry. But one thing seems very clear to us at WTW – the role of the risk manager in today’s turbulent economic and political climate has never been more critical. Not all the risks facing the industry can be fully mitigated, absorbed or transferred, but it will be those companies who do so to the optimum extent that will be best positioned to survive the challenges ahead.

So our theme this year is “meeting the challenges of the new risk landscape”. This year's Review includes a look at the four biggest challenges that the power industry faces today and their impact on the power insurance market, as well as articles highlighting how risk managers can assist in helping their companies manage these challenges. Topics include climate risk modelling (with particular reference to physical and transition risk), managing geopolitical risks, and potential new exposures for directors and investors.

But perhaps there is one issue above all that is of immediate concern to our clients and that is the issue of determining correct asset and Business Interruption values. This issue is highlighted in the Review and our message to the power industry on this topic is really 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, which will in turn reduce the likelihood of large swings experienced between hard and soft market conditions, as we have seen so often in the past.

We very much hope you enjoy reading the Review and as ever would welcome any comments or feedback that you may have.