GCube expands weather risk transfer solution across North America

by Artemis on May 18, 2016

International renewable energy underwriting specialist, GCube, has bolstered its weather risk transfer underwriting team for the wind and hydroelectric energy markets, as it looks to increase its penetration of the U.S. weather insurance and risk management market.

GCube launched its unique weather risk transfer product in the second half of last year, in response to what it saw as a need for a renewable energy solution that mitigates the financial impact of volatile performance.

And now, as it looks to respond to the growing needs of U.S. wind investors and U.S. wind project-financed wind operators, GCube is rolling out its weather risk transfer product throughout the North American marketplace.

Furthermore, to enhance the products capabilities and to support its expansion goals, GCube has announced the appointment of Geoff Taunton-Collins as a dedicated Weather Risk Analyst, tasked with assisting the delivery of the weather risk transfer tool throughout North America.

“The United States is one of the most established markets for wind energy worldwide, with a great track record for long-term project performance. However, it’s fair to say that the industry was caught off-guard by the sheer scale of the climate events that have caused recent low winds,” said Bill Hildebrand, Executive Vice President, GCube Insurance Services.

Throughout 2015 and during the first-quarter of 2016 large parts of the U.S., including Texas and California, have witnessed the lowest average wind speeds since records began.

A trend that has resulted in renewable energy production shortfalls, meaning lower returns for renewable energy producers, which could stop new investors from entering the sector and existing investors remaining.

The renewable energy market continues to expand and developments with technology and hydroelectric and wind energy capabilities suggest that more and more firms that participate in projects are vulnerable to the impacts of adverse weather patterns and events.

While certain risk transfer tools exist to mitigate any adverse financial impact in a number of weather-dependent sectors, GCube explains that uptake in the wind energy market has been minimal owing to limitations with on-site data and modelling.

By utilising an index trigger mechanism determined by on-site weather information and records, GCube explains that it’s product “capitalises on years of experience in the U.S. renewables market underwriting marine, property and casualty insurance.”

GCube’s weather risk transfer solutions aims to mitigate the financial impact that intermittent wind and water resources can create. Providing companies with a tailored solution that “counteracts the financial impact of underperformance by providing proportional payments to the buyer in the eventuality that wind speeds fall below an agreed threshold,” explains GCube.

“The good news is that, as short-term weather and performance monitoring approaches have improved, so too has our ability to mitigate the impact of performance fluctuations on project revenues.

“Keeping cash flows stable during abnormal weather conditions will keep investors on board, keep project financing on track and ensure the longevity of the industry,” continued Hildebrand.

Renewable energy, particularly the weather exposed sector, is an area that is becoming increasingly appealing to reinsurers and insurance-linked securities (ILS) players, as they look to diversify and expand into new peril regions.

GCube feels that, over the long-term, its offering provides a valuable means of delivering steady returns and “facilitating revenue projection critical to the financing of wind energy schemes.”

As renewable energy becomes an increasingly relevant focus for reinsurance and ILS capacity looking to provide capital to back weather related risks, the broader ILS marketplace will increasingly make capacity available to back products like GCube’s, or indeed look to offer their own solutions as has recently been seen.

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