Power Sector Faces Challenging, Unchartered Waters as “Trilemma of Tension” endures, says WTW
08 Novembro 2023 - 7:41AM
WTW (NASDAQ: WTW), a leading global advisory, broking, and
solutions company, highlights the enduring “Trilemma of Tension” in
the global power sector in its 2023 Power Market Review. It
suggests risk managers should invest in horizon-scanning to assess
their own unique risk profile, and to work with partners to enhance
their awareness and better inform and guide suitable risk
mitigation, management, and transfer strategies.
The Trilemma, encompassing stress between energy security,
affordability, and sustainability, has led to continuing volatility
in the power sector. The uncertainty is amplified by the global
polycrisis, including the rising global cost of living,
supply-chain disruptions, and geopolitical tensions. With potential
recession looming and sustained inflation, the power sector faces
the risk of assault on multiple fronts, the report explains.
The Review highlights the changing panoply of risks challenging
the power sector. It includes insightful articles which
discuss:
- ways to optimize risk strategies as budgets tighten and
premiums rise;
- the often-overlooked vulnerability of water supplies;
- potential risks involved in asset life-extension
strategies;
- complex dynamics in the cyber insurance market; and
- the potential benefits of parametric insurance for power
risks.
Power Market Review also considers the current state of the
insurance market. Data and commentary covers areas including:
- Profitability in the power insurance market:
Guest contributor Ian Green, Head of Power at Rokstone
Underwriting, considers the future of the current hard market,
which follows 15 years of sliding rates and widening terms.
- Property risk pricing: The balance of positive
and negative influences over prices suggests that the best programs
will see a 2.5% to 5% rating increase, compared to a flat 5% rise
last year.
- International liability: The market appears
more focused on rate adequacy than rate movement, with prices
stabilising for favoured risks, and average rate increases falling
to mid-single digits.
- Construction: Two decades of falling rates and
broadening coverage have since solidified into a hard market.
Construction-risk pricing is now stabilising, but project-specific
geographical, economic, political, sociological, contractual, and
technical risks mean power construction projects face increased
insurer scrutiny.
Graham Knight, WTW’s Head of Global Natural Resources, said:
“The challenges we reported in 2022 – the Russia-Ukraine conflict,
global inflation, energy transition, and climate change – are
ever-present. We’ve seen some positive developments, though.
Wholesale gas markets have eased, and supply has shifted away from
Russia. There’s signs of global inflation easing as economies
respond to higher interest rates, and growing momentum behind the
energy transition.
“On the other side of the equation,” he continued, “the crisis
in the Middle East, precipitated by the Israel – Hamas conflict,
combined with the very real potential for a global recession,
creates further uncertainty for generators and markets. High levels
of natural catastrophes are also driving major losses across the
continents, and they’ve showed no sign of returning to lower
historical norms. Meanwhile, transmission networks are coming under
pressure from a higher reliance on intermittent power, as
re-commissioned coal plants are turned off and gas-fired output is
deployed to balance the system.
“All of these issues are creating uncharted waters for the power
sector, as generators of all types, conventional and renewable,
seek to balance competing demands for energy security,
affordability, and sustainability. That trilemma is as challenging
as ever.”
About WTW
At WTW (NASDAQ: WTW), we provide data-driven, insight-led
solutions in the areas of people, risk and capital. Leveraging the
global view and local expertise of our colleagues serving 140
countries and markets, we help organizations sharpen their
strategy, enhance organizational resilience, motivate their
workforce and maximize performance.
Working shoulder to shoulder with our clients, we uncover
opportunities for sustainable success—and provide perspective that
moves you.
Learn more at wtwco.com.
Media contact
Sarah Booker: +44 7917 722040Sarah.Booker@wtwco.com
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