Energy Transition Premiums Projected to Surpass $9 Billion by 2030 – Aon Launches Framework to Help (Re)Insurers Capture Growth
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.
Brazilian reinsurers Austral Re and Terra Brasis Re to merge
Brazilian reinsurers Austral Re and Terra Brasis Re have signed an investment agreement to merge their operations in order to create the second-largest domestic reinsurer in the vast South American country. This union will result in the second-largest Brazilian reinsurer in terms of reinsurance premiums underwritten (R$ 672 million in combined gross premiums underwritten in 2018) and the fourth-largest Brazilian reinsurer in terms of shareholders´ equity (R$ 387 million combined net equity in 2018).
The controlling interest in the operation will be held by Vinci Partners, along with partners from the Brasil Plural group and the International Finance Corporation (IFC), the investment arm of the World Bank, which already have stakes in the two companies.
The competitive positioning of the new reinsurer will be strengthened by the complementary nature of the business portfolios and the expansion of the geographic coverage in Brazil and abroad, with offices in Rio de Janeiro, São Paulo, Colombia and Guernsey. It will also have authorization to operate in various other Lain American countries.
Bruno Freire (pictured above) will be the CEO of the new company and Rodrigo Botti will be the CFO. The reinsurer will maintain its strategic focus on serving the insurance industry in all the business lines, with innovative solutions, excellent attendance, responsible risk management and the highest standards of corporate governance.
“The merger provides an extraordinary opportunity for long-term value creation. We expect the combined businesses to capture significant operating, administrative and economic- financial synergies. This is a partner which has a broad knowledge of the sector and will bring about an invigorated capacity for growth and international expansion of business,” says Freire.
“It is a unique opportunity to speed up the expansion strategies with a new strength and dimension. We are excited about the opportunity to gain scale, the product portfolio and the commitment of our teams,” said Rodrigo Botti.
Vinci Partners indicated that the merger will not interfere in any way in the shareholder composition of Austral Seguradora, which is controlled by Vinci Partners.
The conclusion of the deal is conditional on the approval of Brazil´s official anti-trust agency, known as the CADE, and the Private Insurance Supervisory Regulator (SUSEP).