Some news from Guernsey as Paratus Renewables Insurance gets the green light;
As the world shifts towards the development of sustainable and renewable energy projects, the insurance industry is increasingly focused on finding ways to support them. However, this is not a simple task as it often requires the development of new products to cover the unique risks associated with renewable energy technologies like wind, solar, and hydroelectric power.
This makes the latest news from Paratus Renewables Insurance Limited all the more significant. The organisation was recently granted regulatory approval by the Guernsey Financial Services Commission (“GFSC”) to provide insurance cover to the renewable power industry.
By achieving this milestone, Paratus is the world’s first insurer to offer policies for renewable power price protection. It marks the start of what will surely be a growing shift in insurance offerings for this sector.
But it is not just forward-thinking insurers that are needed to create this change. This change also requires jurisdictions that are willing to move with them and create a regulatory framework that can facilitate their new insurance products so they can be taken to the marketplace.
The Channel Island of Guernsey, measuring just 27 square miles, has stepped up to the plate to provide just this supportive regulatory environment. Boasting a well-established professional services industry, it is the ideal base for companies looking to introduce cutting-edge financial products, especially in sectors like renewable energy.
Pioneering renewable energy insurance
At the heart of this latest development is the Paratus Group of Companies, already known for underwriting energy price risk. The recent approval from the GFSC allows Paratus to extend its expertise into the renewable power sector, offering insurance to protect generators from adverse energy price volatility. The move marks the creation of the world’s first policy specifically designed for renewable power price protection, providing a significant competitive edge to renewable assets such as wind, solar and biofuels.
By safeguarding against adverse price risks, the Paratus policies enable renewable power generators to improve the investability of the sector by augmenting NAV and IRRs, which boosts their competitiveness when compared to traditional forms of energy. In addition, the policies enable power consumers to better manage operating costs and stabilise balance sheets in a highly opaque marketplace.
But innovation does not happen in isolation. As well as a supportive regulator, Paratus also benefits from strategic partnerships. A collaboration with px Group, a leading provider of energy infrastructure services, enables Paratus to offer an end-to-end solution for renewable power generators. Clients gain access not only to insurance coverage but also to power balancing services and 24/7 monitoring, creating a comprehensive solution for managing energy price risk.
A proactive regulatory environment
Guernsey’s role in enabling this development should also not be overlooked. In fact, as a hub for the insurance industry, the small island makes a sizeable contribution. According to a Frontier Economics report published in January this year, the Guernsey insurance sector earned £4.8 billion gross written premium at the end of 2022.
Guernsey as a jurisdiction also has a well-earned reputation for its responsive and flexible regulatory framework. For example, Guernsey was responsible for the development of the Protected Cell Company (PCC) for the insurance sector – a product which has now been replicated across the world.
The speed and efficiency with which the GFSC granted approval for the new Paratus product demonstrates its commitment to fostering innovation – whilst showing other organisations and jurisdictions that it can be done.
One of the key factors that make Guernsey an attractive location for businesses like Paratus is its ecosystem of professional service providers. The island boasts a network of legal, accounting, and insurance professionals who bring a wealth of experience and expertise. This infrastructure allows businesses to launch and scale new products with the support they need to navigate regulatory and operational challenges.
Guernsey’s geographic proximity to London is another significant advantage for businesses looking to establish a global presence. With London still being one of the world’s leading financial centres, Guernsey’s location offers easy access to key markets while providing a distinct regulatory advantage. This proximity allows organisations to maintain close relationships with clients and partners in the UK and Europe, while also benefiting from Guernsey’s supportive regulatory and business environment.
For companies in the insurance and financial services sectors, being close to London’s deep talent pool is invaluable. Many professionals in Guernsey have experience working in major financial hubs, bringing world-class expertise to the smaller island’s business landscape.
Guernsey’s financial services sector is also increasingly aligned with global efforts to transition towards renewable energy. Initiatives like the world-first Guernsey Green Fund regime provide a regulatory framework for investment in environmentally sustainable projects, demonstrating a shift towards green finance positions for the jurisdiction as a whole.
What’s next?
Now it’s been proven that these types of policies can be created, it’s only a matter of time before other organisations look to catch up and launch their own competitive products. But it is still not an easy ask.
The renewable energy market presents unique challenges for insurers due to the evolving nature of the technologies involved and the unpredictable risks they pose. When looking at developments such as wind farms, solar arrays, and energy storage systems, insurers must grapple with limited historical data, making it difficult to accurately assess risk. Additionally, renewable energy projects are often subject to complex regulations that vary significantly between regions, creating further uncertainty.
Finding supportive regulatory environments for these new products can be challenging, as governments and industry bodies are still in the process of establishing consistent guidelines and frameworks. This lack of standardisation makes it harder for insurers to create appropriate coverage solutions, while also balancing the need to support the growth of green energy initiatives.
It is encouraging to know that Paratus and Guernsey have worked together to overcome these challenges, and perhaps we are about to see a new hub of expertise develop in the English Channel.
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