As the marine and energy insurance market gathers in Rotterdam for the International Union of marine Insurance’s annual conference Alistair Moodie, Chief Product Officer, at Lloyd’s Lab Insurtech, SAMP Risk, examines what insurers need to do to keep pace with the fast-evolving renewable energy sector.

The global renewable energy generation market is changing rapidly. Smaller, distributed power generation sites feeding into local grids, are expected to double over the next five years[. The problem is that the specialty insurance market serving this emerging risk is not keeping pace. That can impact the viability and financial resilience of these power firms and creates a disconnect with the insurance market’s own green energy ambitions.

Renewable energy sites tend to be operated by small teams without the engineering resources of larger power plants. As such, the quality of day-to-day risk management can vary significantly between sites. Machinery breakdown and business interruption losses can be severe. Yet insurance still largely relies on static information, periodic surveys and renewal-cycle documentation. In effect, insurers are largely blind to how a site is managing risk in real time, making it difficult to price risk accurately or to reward policyholders who are actively reducing exposure during the policy period.

The challenge and solution is comparable to young driver motor insurance, where telematics, or “black box” insurance, helps insurers price policies and manage claims using data on how vehicles are actually driven.

Taking the lessons learned in motor, telematics is now being used in renewable energy insurance: using live asset and operational data to understand how risk is being managed in practice.

Just like in motor insurance, a proprietary plug-and-play telematics device installed on site can collect machine data in real time and send insights to a cloud-based platform. This is then combined with operational information — including inspection reports, oil analysis, site actions and operator behaviour indicators — to generate a live risk score.

That score not only tells insurers how that site is behaving in real-time, it can trigger automated actions, tasks and communications for asset owners and on-site operations teams. It can tell them when failure of a part is imminent, faster than the supplier of that part, it can help manage the risk of failing during times of peak demand, where failures can cause an existential threat to the business. Risk is therefore managed continuously during the policy period, rather than assessed only at inception or renewal.

Renewable energy sites may also be able to use their live performance data to access deductible buy-down cover, helping them release capital and earn back premium by demonstrating better risk management.

Renewable energy sites are often required by lenders to hold up to 90 days of revenue in reserve against the risk of a business interruption claim. By demonstrating improved risk management, through the telematics data score, that buffer can be cut to around 30 days, in some cases releasing significant capital.

On one solar energy site, event investigation detail increased from 6% to 67%, half of all risk recommendations were closed early rather than deferred until renewal, and technical mitigations, including inspections, reduced the risk of major failure by 14% by month four.

Deductible buy-down cover is just one example, data-driven capacity insurance, parametric products and first-loss policies can all be enabled through this telematics solution.

As distributed generation grows, the need for continuous, data-driven oversight of operational risk will intensify. For insurers and underwriters, asset-level data and risk indicators can support more accurate pricing, active risk management and stronger policyholder engagement. For brokers, the opportunity is to create a differentiated proposition, helping clients demonstrate better risk management and access products that reflect operational behaviour rather than static policy terms. Policyholders, in turn, gain recognition for better risk management and live operational insight that helps site teams address potential failures before they become claims.

The interests of asset owners and insurers are closely aligned: owners want to maximise generation and avoid machinery breakdown, while insurers want to reduce losses from breakdown and business interruption. There is a pressing opportunity to connect those objectives through live asset data, engineering insight and a dynamic risk scoring model.