LONDON, Nov. 14, 2013 (GLOBE NEWSWIRE) -- As the merits of different types of power generation continue to be influenced by government regulation and volatile fuel prices, companies are finding themselves exposed to complex new risks, according to the latest Power Market Review, from Willis Group Holdings Plc (NYSE:WSH), the global risk adviser, insurance and reinsurance broker.
With the renewables sector continuing to thrive, operators and their underwriters have to contend with many complex new risks. Wind power, for example, is growing globally at a rate of 30% annually, with a worldwide installed capacity of 282,482 megawatts (MW) at the end of 2012, according to the Renewables Global Status Report.
Many governments have also committed to meeting a set share of demand from renewables. The EU Renewables Directive, for example, stipulates that at least 20% of total energy consumption in the EU will be obtained from renewable sources by 2020, and the Australian government has set the same '20% by 2020' target. To meet the growing demand, renewable energy companies are building larger wind turbines. As turbines increase in size, so too do the costs when things go wrong.
Meanwhile, Concentrated Solar Power (CSP) is becoming more popular, particularly in the US, Spain, Africa and the Middle East. But CSP remains a 'high risk' technology for insurers compared with traditional Photovoltaic (PV) arrays. The insurance market has seen individual losses in excess of USD 15 million for CSP heat exchangers, suffered a number of fires due to poorly cleared land, and seen turbine failures resulting in single claims in excess of USD 6 million.
At the same time, the level of machinery breakdown losses in the power sector as a whole is an on-going concern for underwriters, according to the report. Because of the need to accommodate more renewable generation to meet environmental goals, many Combined Cycle Gas Turbine (CCGT) plants that were designed to operate at baseload (i.e. at a steady and consistent capacity) are now having to 'two-shift' – a term given to the process of shutting down a plant when demand for output is low and restarting it when demand increases – which can cause more wear and tear on a plant's machinery. Power generators should ensure that proper engineering and operational practices are in place to minimize these risks, noted Willis.
Nevertheless, capacity in the power insurance market has, to date, held up well with none of the leading insurers walking away from the sector. In fact, new capacity is entering the power insurance market, which is having a dampening effect on premium rates despite loss trends.
Commenting on the power market, Graham Knight, Deputy CEO of Willis' Construction, Property & Casualty division, said that the relatively stable market environment is "very much to the credit of the insurance industry, which has demonstrated resilience in the face of continuing power sector losses and shown that it is there for its clients for the long term. It is clearly good news that an industry whose purpose is to provide some form of stability to its customers is itself showing stability, especially when change is continuing apace elsewhere."
Willis Group Holdings plc is a leading global risk advisor, insurance and reinsurance broker. With roots dating to 1828, Willis operates today on every continent with more than 17,000 employees in over 400 offices. Willis offers its clients superior expertise, teamwork, innovation and market-leading products and professional services in risk management and transfer. Our experts rank among the world's leading authorities on analytics, modelling and mitigation strategies at the intersection of global commerce and extreme events. Find more information at our website, www.willis.com, our leadership journal, Resilience, or our up-to-the-minute blog on breaking news, WillisWire. Across geographies, industries and specialisms, Willis provides its local and multinational clients with resilience for a risky world.
CONTACT: Media: Nathan Hambrook-Skinner + 44 2031 248 716 Email: email@example.com Investors: Peter Poillon +1 212 915 8084 Email: Peter.Poillon@willis.comSource:Willis Group Holdings