2021 saw a European ‘wind drought,’ when unusually low wind speeds led to a €380 million loss for Ørsted, with no insurance to protect them against the drop in revenue.
A major insurance broker brought together experts, including climate risk modellers and underwriters, to craft a bespoke insurance solution for offshore wind. The lack of historical data and modelling for offshore wind was remedied by new catastrophe models, which gave clarity on extreme-weather loss scenarios. Importantly, the broker also tackled the problem of ‘uninsurable’ revenue volatility due to fluctuating winds by tapping into alternative risk transfer markets.
The result was a first-of-its-kind insurance solution with a parametric trigger tied to wind conditions and energy output. The policy automatically pays out – without requiring physical damage evidence. Better data and parametric designs enabled underwriters to price coverage more accurately and offer greater capacity, helping project developers and lenders to greenlight offshore wind projects where they otherwise might stall.
