WTW Power Market Review 2024
While the risks faced by particular countries may vary, key trends impacting (re)insurer appetite, terms and pricing remain a constant: coal; supply chain; and U.S. exposures. Despite these headwinds, a general softening of market conditions echoes around the world, and power companies are mobilizing to right-size their insurance strategies.
By Alex Forand, Head of U.S. Power and Utilities Broking, Natural Resources
The traditional power sector faces increasing pressure from regulatory frameworks aimed at reducing carbon emissions and promoting sustainability. Utility companies are investing in upgrading infrastructure and adopting cleaner technologies to comply with these regulations. Despite these challenges, traditional power remains a crucial part of the energy mix, especially for providing reliable baseload power. The power sector in the U.S. is evolving with a greater emphasis on maintenance and improving efficiency.
By Ray Zhang, Power and Infrastructure team, Natural Resources, China
The power insurance market in China is relatively stable, with the top three Chinese insurers enjoying a net profit growth in the first of 2024. Insurers maintain huge capacity for coal-fired power risks, which have been profitable in 2024 so far, and rates remain flat or have a slight reduction. But a number of potential factors are in play: the rainstorm and flood impacted Southern China; the claim payments of whole Chinese insurance industry from January to July 2024 increased 30% compared to the same period last year; and economic slowdown. Chinese insurers are struggling to achieve their annual budget, which may aggravate the competition between insurers.
By Lyo Foo, Head of Power for Asia, Natural Resources
For the last three years, the power market in Asia has been through a phase of correction and hardening. However, at the start of 2024, we have seen a notable change in market conditions, and readily available capacity has resulted in a return to a buyers’ market. A shift in appetite from coal to non-coal power and the phasing out of underwriting existing coal risks have combined to encourage insurers to seek new opportunities in deploying their capital. Flat-rate renewals have become a norm, and well risk-managed assets have been able to achieve rate discounts, but supply chain and business interruption remains a core concern for the year ahead.
By Alejandra Railton, Power and Renewables Leader, Latam and Head of Natural Resources South Cluster (Chile | Perú | Argentina)
Insurers maintain disciplined underwriting within the power sector. Key insurance market observations include: controlled capacity deployment; increased scrutiny on property damage and business interruption values; a trend toward reduced line sizes and concentration on natural catastrophe limits; greater examination of policy conditions, deductibles, and sub-limits, driven by the competitive cycle's pressures; and expected single-digit rate increases for 'good' risks, while claims-heavy portfolios may face higher adjustments. Wider trends to watch include: continued concerns regarding machinery breakdown; insurers focusing on ESG initiatives; and supply chain issues.
By Mark Hiles, Global Head of Power Broking, Natural Resources, UAE
Due to increasing regional demand for power, a mix in the age of assets, pressures to shift toward renewable energy, plus huge competition between the UAE and KSA openly competing for data center dominance, we expect to see regional capacity continue to increase and regional specialist underwriting expertise to keep pace with the changing risk landscape. For the near future, favorable global market conditions and an influx of capacity have seen rates continue to drop c.10% for clean business on a like-for-like basis in the region. These pressures are overriding the impact of an active nat cat season with two large storm events which caused insured losses to the local market in excess of AED10.5 BN.
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| How power sector trends are impacting key geographies in 2024 | .2 MB |
