In an October report titled North American Nat Cat UpdateGCube described the extent of recent damage and estimated the size of claims as “unprecedented”, despite greater awareness of extreme weather events.
“Large-scale losses such as the ones we experienced this summer always seem to take the industry by surprise, with extensive damages and sub-limits greatly exceeded, a common feature of emerging cat nat and extreme weather claims. “, says the report.
Hail in Texas in early summer 2022 resulted in solar losses estimated at more than $300 million – almost twice as severe as the major renewable losses of the past three years combined, and nearly ten times as severe as losses from Hurricane Hanna in 2020, GCube said.
In this context, GCube argued that a further market correction is needed to ensure “North American renewable energy projects are properly hedged against growing risks.”
For example, the report states that several solar losses exceeded sub-limits of up to $50 million as a result of cat nat events over the past two to three years.
“The magnitude of these excesses clearly demonstrates that market hardening still has some way to go to sustainably address nat cat losses,” the report said. “Without market hardening, sub-limits will continue to miss the mark.”
Lack of modeling is a ‘persistent problem’
The report notes that unmodeled extreme weather hazards have continued to drive most damage over the past two years, despite the availability of weather data, which the industry is “not making the best use of”. .
Tornadoes were more difficult to forecast than hail because several events occurred outside of their traditional season and losses were grouped with other types of risk.
“The inability to distinguish between wind events clearly points to the need for a better understanding of non-traditional wind patterns,” the report said.
Additionally, the frequent incidence of solar losses across a range of extreme weather events suggests that the development of solar technology is “lagging behind” when it comes to improving weather resistance.
Supply chain issues
The U.S. renewable energy market has also been badly hit by global supply chain compression and rising parts costs, GCube said.
“We anticipate this will be a significant complicating factor in repairing damage caused by natural disasters and extreme weather events,” the report said. “This presents an increasing challenge for insurers as owners seek to mitigate their skyrocketing construction and repair costs, as well as any potential loss of revenue.”
Price increases have also exacerbated the market’s search for the profitability of solar and wind technologies, the report notes. This in turn can reduce the resiliency of installments to weather events.
In solar, for example, thinner glass panels have recently been used to reduce the raw materials needed for construction.