McGill launches offshore wind cat models to boost capacity in high-risk areas

Specialist broker McGill and Partners said a new collaboration with Renew Risks to develop catastrophe models for offshore wind will create more capacity for insureds as projects get underway in more exposed areas.

McGill said demand for in-depth cat models has increased as the offshore wind sector grows and expands into new and high-risk areas, or further out to sea.

“Robust models will help the market better understand and quantify the risk, determine appropriate (re)insurance limits and understand aggregation across multiple windfarms in one region,” the broker said.

“This will lead to increased insurance capacity available for the benefit of the developer, enabling (re)insurers to offer more competitive and sustainable products, and reduce their own capital requirements and volatility,” it added.

Renew Risk, a risk analytics SaaS provider for renewable energy, has built five models covering northeast US hurricane, Taiwan earthquake and typhoon and Japan earthquake and typhoon risks.

McGill said the models will help fully understand natural perils for offshore wind projects in these regions, help set appropriate insurance limits and calculate risk aggregation where there are multiple wind farms concentrated in a region.

Ashima Gupta, CEO at Renew Risk, said new offshore wind projects have surged in regions susceptible to natural disasters. “It is important to have robust risk models which will allow (re)insurers to appropriately assess the risk of these billion-dollar assets constructed in the deep sea.”

McGill said until now, cat risk to offshore wind farms has been calculated using “general rules of thumb” or by modelling the risks as onshore.

“To date, there are no commercially available models for offshore windfarms in the areas of interest where many offshore assets are increasingly being built, frequently in areas that are highly exposed to natural catastrophe perils,” it explained.

Tom Sexton, partner and head of renewables, power and energy at McGill and Partners, said: “There has been a pressing need for a custom-built offshore wind catastrophe model to accurately assess the probability of loss for this rapidly developing asset class in high-risk zones.”

Sexton added that the models will help insureds access more efficient risk transfer capital as insurers better understand the exposures and risks.

“This will give insurers and reinsurers the confidence to provide greater capacity at more appropriate pricing levels to our offshore wind clients in high catastrophe zones,” he said.

Dr Catherine Tillyard, partner in treaty reinsurance at McGill and Partners, agreed that more advanced and specific modelling will boost capacity for the growing wind farm sector. “Without sufficient insurance, offshore developers are unable to access credit for these large-scale projects. These catastrophe models provide all parties with a more accurate assessment of the risk, enabling such projects to become a reality – crucial if we are to transition to renewable energy sources.”