AON has announced the launch of its Low-Carbon Transition Framework for Insurers – a seven-step process aimed at driving (re)insurer engagement with the sustainable energy sector, where global premiums are forecast to exceed $9 billion by 2030.
The Framework, which focuses on strategy, evaluation, innovation and talent, provides an actionable pathway to profitable growth by helping (re)insurers capture surging premiums from rapid innovation and rising investments in sustainable energy solutions – such as hydrogen, battery storage and renewables. In turn, through their capital support (re)insurers will increase the viability of low-carbon energy projects and drive climate resilience.
To help unlock opportunities in this sector, the holistic Aon Framework assists (re)insurers to align their underwriting appetite with emerging technologies; embed transition risk management into enterprise strategies and leverage performance analytics to benchmark portfolios. Its dynamic approach allows companies to define their strategy, assess current exposures and identify growth opportunities.
Aon research has forecasted high premium growth rates across the energy transition sector, resulting from an accelerating demand for insurance products that support the rapid scale-up of clean and innovative energy solutions:
- Battery Energy Storage Systems are expected to generate more than $1 billion in Gross Written Premiums (GWP) by 2027, with an estimated 25 percent compound annual growth rate (CAGR), driven by emerging needs for embedded insurance coverage and cyber protection.
- Hydrogen-related risks represent a market opportunity of $5 billion GWP by 2027 with at least 10 percent CAGR, across the full value chain from early prototypes to advanced leak detection systems.
- Insurance for renewable power generation is forecast to increase by nearly $3 billion globally between 2024 and 2030.
Aon’s Low-Carbon Transition Framework for Insurers recognizes that talent and innovative insurance product development will be central to seizing such premium opportunities.
In response, the firm’s Power, Utility and Renewables team continues to design non-traditional solutions – including parametric weather coverage and forced-outage programs – which enhance project feasibility and resilience. By assessing, pricing and transferring risk, re/insurers can enable the scale-up of renewables and emerging technologies like hydrogen, battery storage and carbon capture.
Meanwhile proprietary tools, such as Aon’s Global Power Premiums data and Transition Performance Index, allow re/insurers to monitor sector trends, claims analytics and loss ratios – ensuring technical pricing and risk selection remain competitive and best-in-class.
Wouter Bosschaart, global climate and net-zero transition leader for (re)insurers at Aon, said: “With energy transition premiums set to surge, Aon’s Low-Carbon Transition Framework empowers (re)insurers to make better business decisions and seize opportunities around this growth. As the industry develops new products and services that align with this rapidly evolving sector, it will help to drive climate resilience for governments, businesses and communities, while delivering enduring value for stakeholders. (Re)insurers that adopt data-driven insights will be best-positioned to capture market share and deliver sustainable, profitable growth through the energy transition.”
To assist (re)insurers with their broader climate strategies, Aon continues to expand its Climate Risk Advisory capabilities, helping clients to shape better, proactive decisions in an increasingly complex and fast-moving energy landscape and a growing decarbonizing economy. Meanwhile, Aon’s climate innovation hub continues to further enhance the firm’s data, analytics, insights and solutions to better advise clients on emerging and evolving risks that are increasingly complex and interconnected.