Insurance Challenges in China's Expanding Renewable Energy Sector
China's expanding new energy sector, including solar, wind, and energy storage, faces significant insurance coverage challenges, as highlighted during Shanghai Climate Week. Jack Yuan, CEO of Generali China Insurance, emphasized that ensuring the insurability of green energy projects is crucial to their financial viability. A white paper from Generali China and Fudan University underscores this challenge, stating that over CNY270 billion (approximately USD37 billion) of high-risk energy storage assets remain inadequately insured, with the unprotected asset pool growing annually by CNY160 billion.
Wang Hui, general manager of Shanghai Electric Insurance Brokers, noted that China's insurance market for renewable energy is substantial. However, technological advancements among domestic insurers are lagging. Local insurers often avoid ventures lacking reinsurer support. Yuan highlighted the critical issue of the absence of robust pricing tools and adequate data for underwriting these risks.
Energy storage technology's rapid evolution renders traditional actuarial models insufficient due to outdated claims data for new technologies. Despite growing demand, China lacks mandatory insurance requirements for energy storage on a national scale, keeping the market in an exploratory phase. Yuan emphasized the necessity of adopting artificial intelligence for dynamic risk assessment and pricing, as data from a mid-sized storage facility can be immense, equivalent to fifty years of conventional insurance records.
Generali China's green insurance segment now constitutes 15 percent of its portfolio, a marked increase from 3 percent five years ago. According to McKinsey, this figure is expected to rise to 42 percent of the property and casualty market in China by 2030. In 2024, China added 373 gigawatts of renewable energy, representing a 23 percent increase over the previous year, according to the National Energy Administration.
The industry progresses towards a Risk-as-a-Service (RaaS) model, offering outcomes like committed energy throughput backed by financial assurances. The global energy storage RaaS market is projected to expand to USD177.6 billion by 2035 from approximately USD10.9 billion last year. Yuan emphasized the need for collaborative efforts to build an industry ecosystem.
Chinese new energy companies encounter challenges in international markets, often overlooking local regulatory and labor conditions, Yuan noted. Insurers provide potential value overseas, focusing on risk prevention and mitigation. Wang Hui mentioned that local insurance policy requirements in many countries are barriers for Chinese insurers, leading to the selection of foreign insurers for coverage.
Generali, leveraging its international network, aims to support Chinese clients navigating these challenges and bridging gaps in overseas insurance markets, as Yuan highlighted.