Innovative risk transfer solutions will be needed for emerging technologies as energy markets transition, says Neil Eckert
The transition to zero carbon economies will bring plenty of challenges, but also opportunities for innovative insurance and reinsurance companies. This is according to Neil Eckert chairman of IncubEx and co-founder, Conduit Re.
Speaking at the Marsh McLennan Rising Professionals Global Forum, he said underwriters should stop introducing blanket exclusions for risks they are uncomfortable with and instead start innovating.
One challenge with renewable sources of energy is that it can create significant power grid imbalances. Eckert thought insurance solutions could help to hedge the peaks and troughs.
There is also a market for products to insure risks attached to carbon offsets, he thought.
Parametric solutions are one way to get around the lack of data available from new and relatively untested technologies.
But capacity from the traditional markets will prove inadequate and re/insurers and brokers will need to tap the capital markets as solutions evolve.
The key is to seize the opportunity before you become a “financial refugee”, thought Eckert.
“We are in the early stages of the development of this market, but innovation is what the London market does best and where we have a competitive edge.”
We need “every tool in the toolbox” – including lifestyle changes, renewable technology, carbon trading, and insurance - to tackle climate change, added Eckert.
“Energy security is the biggest watchword of our time,” he said. “You’ve got to ‘dig for victory’, make your own power and make sure it’s renewable. Once you’ve created a market that prices carbon, that impacts the cost of fossil fuel. The change in behaviour will be driven by pure economics.”