ILS is key for mobilising risk capital for energy transition investment: Beazley

A new study by Beazley, the London headquartered specialty insurance and reinsurance company, has highlighted how insurance-linked securities (ILS) and various alternative risk transfer solutions are key for mobilising risk capital for the energy transition.

Beazley’s latest Spotlight on Energy Transformation 2026 observes that the insurance industry is becoming a core enabler of the energy transition, particularly given that it does more than absorbs losses, and helps turn uncertainty into viable, investable projects.

The re/insurer’s report comes as tensions in the Strait of Hormuz are increasing energy security fears, while the growth of energy-intensive technologies underscores the need for alternative energy solutions.

“Insurance extends beyond a financial backstop, shaping energy transition decisions through risk insight, alongside shaping which energy projects proceed, on what terms and pace. However, this raises the question of whether it can scale fast enough to meet demand,” Beazley explained.

“The shift is clear. The energy transition is forcing insurance to move from reactive protection to a more active role in enabling growth. But it requires more sophisticated approaches to uncertainty that address financing, risk sharing, alternative risk transfer solutions and all-round resilience.”

Beazley’s report, which surveyed 3,500 global business leaders, emphasises a significant trillion-dollar transition opportunity that is presently obstructed by various risks.

These risks are ultimately creating obstacles to capital deployment and postponing investment decisions, thereby underscoring the necessity to transfer risk in order to unlock capital.

“The scale of investment required goes beyond traditional insurance capacity. Net zero cost estimates by 2050 range from US$100 trillion to US$300 trillion. Alternative risk transfer solutions are key to mobilising that capital and managing the risks associated with it,” Beazley explained.

The firm noted that utilising alternative tools such as catastrophe bonds, parametric instruments, and other forms of ILS, are helping to extend capacity to provide the level of protection that today’s larger, more complex projects require.

“Cat bonds, and other ILS and parametric structures can supplement more traditional models where project scale outstrips market capacity. The reinsurance market has a fantastic opportunity to be more creative about how we deploy capital alongside conventional risk transfer,” commented Richard Gray Bermuda General Manager & Head of Third Party Capital, Beazley.

Beazley’s report also acknowledges that public-private collaborations are becoming central to transition efforts.

According to the firm’s research, governments are looking to use incentives and guarantees to make marginal projects more viable. While multilateral banks, export credit agencies and green funds are partnering with insurers to expand insurability across markets and technologies.

As well as this, specialist insurers are reportedly providing more site-specific risk insight and resilience advice towards these types of projects.

In addition, Beazley noted that brokers are playing a more strategic, connective role in translating risk into sharper underwriting, more tailored solutions, and smoother project delivery.

“New risks require policies bridging property, energy and environmental coverage, with closer cross-team collaboration. Siloed thinking produces coverage gaps, and coverage gaps cost clients,” added Lindsay Shipper, Head of North American Commercial Property, Beazley.