Carriers need to rethink energy exposure management
Dynamic, digital-first platforms are beginning to shift the paradigm regarding how energy portfolios are monitored, modelled and managed
Re/insurers must start embedding energy exposure management into strategic underwriting and portfolio steering
The energy sector is undergoing rapid transformation, from the growth of renewables to the diversification of supply chains and the geopolitical instability shaping new risk hotspots, yet all too often exposure management practices in many insurance and reinsurance businesses remain stuck in an outdated model that is no longer fit for purpose.
Traditional approaches, built on annual roll-ups, static catastrophe models and fragmented reporting across siloed teams, cannot keep pace with the interconnected, dynamic nature of energy risk today. Add to that mounting regulatory scrutiny, tighter controls on natural catastrophe aggregations and the complexity of composite placements across upstream, downstream, renewables and energy liability lines and the cracks are beginning to show.
Recent events have only underscored the urgency. The Iberian blackout last month – caused by a cascading failure of transmission infrastructure across Spain and Portugal – highlighted just how vulnerable today’s energy systems are to systemic, interdependent risk.
Wake-up call for insurers
What began as a localised disruption triggered a cross-border chain reaction, affecting power generation, industrial facilities, and critical supply routes. For insurers, it was a wake-up call: exposure is multi-dimensional, fast-moving and increasingly difficult to model using legacy tools.
The industry often talks about the need for better data, greater collaboration and more sophisticated exposure management, but too often change is slow and innovation is piecemeal. Fortunately, best practice is emerging in the form of dynamic, digital-first platforms that are beginning to shift the paradigm regarding how energy portfolios are monitored, modelled and managed.
The industry often talks about the need for better data, greater collaboration and more sophisticated exposure management, but too often change is slow and innovation is piecemeal
Technically, this means automating the ingestion of exposure data (such as bordereaux and engineering reports), refreshing location-level risk profiles on a daily rather than annual basis and integrating third-party hazard data sets (such as windstorm, wildfire or flood models) directly into portfolio views. It also means enabling multi-peril, multi-line analysis of large and complex accounts, often with shared assets or infrastructure, that have historically been treated in isolation.
Real-time view of risk
Crucially, modern systems provide geospatial visualisation, allowing underwriters and exposure managers to see proximity, aggregation and clash exposure in real time; whether that is a new offshore wind farm entering a high-hazard zone or a refinery with known vulnerability to wildfire. This empowers a shift from hindsight to foresight and from reactive to proactive risk management.
If insurers and reinsurers are serious about managing volatility and building sustainable energy portfolios, they need to stop treating exposure management as a back-office hygiene task and start embedding it into strategic underwriting and portfolio steering. That means real-time insight, system integration and the ability to connect detailed risk information with executive-level decision-making across the business.
The direction of travel is clear but, as always in insurance, execution is everything. For those willing to lead, the opportunity is not just to improve risk selection and capital efficiency, but also to unlock smarter growth in one of the most dynamic and essential sectors of the global economy.
Guy Williams is exposure subject matter expert at Ebix Europe
