As we look back over 2024 and prepare for the New Year, we’ve set out some of the key trends that we anticipate affecting the market in 2025.
- A Softening Renewables Market. More capacity will enter the market as insurance companies look for a share of the continued growth in the renewables sector, and/or to replace premium from increasingly restrictive fossil fuel policies as 2030 deadlines loom. Aside from lower rates, implications include lower deductibles and broader terms.
- Service Beats Pricing. Specialist brokers and managing general agents that can add distinct client value through deep understanding of specific technology risks will see more market share than large energy and natural resources teams. Insurers who confidently understand new battery chemistries (e.g. sodium-ion), and react quickly to technology changes, project sizes and broader geographies will resonate with insureds and pick-up more business – particularly in fast-growing sectors. Generalists will struggle to compete, which may spark acquisitions of smaller, specialist firms.
- Deferred Profit Share Key to Keeping Staff. The staff merry-go-around will keep rotating in 2025 unless carriers can tie underwriters to rolling long-term incentive plans. Unstable teams will be overlooked for lead positions as account familiarity is key.
- More Shepherds. By mid-year, key personnel moves, and new teams means more leaders. Potential leads will have to work harder to differentiate themselves, mainly on service levels and smooth transactions.
- Increased NATCAT appetite. On average, 2024 ended with lower natural catastrophe claims than expected. Moving into 2025, CAT pricing is unlikely to be affected but we expect larger carriers to flex their muscles by offering bigger lines and, or higher primary limits.
- Reinsurance retreat pushes back risk. Reinsurers will reduce exposure to certain renewable technologies owing to escalating losses, manifested as restricted wordings, limits and higher pricing. Reinsurance capacity is unlikely to be affected to the extent that the market will begin to harden in 2025, but primary insurers will have to be more creative in their solutions for insureds and carry more risk.
- All Chat No Action. This year, last year, and the year before it was green hydrogen. Next year, expect more chat around nuclear, huge green hydrogen projects and carbon capture construction projects. Most of the hype is years away and at smaller scale than envisioned. Brokers should be qualifying opportunities before approaching the market in haste.
- Wind Installations to Rebound. By now everyone is familiar with the unique challenges facing the onshore wind sector. Next year should see these challenges fade away as turbine makers double-down on quantity (a pivot to incremental innovation), quality (up front higher costs to save on lifetime running costs) and modularity (common parts across models, potentially across platforms and – less likely — turbine makers). Coupled with an easing in planning constraints, a clearer political map for the coming years (post many important elections in 2024) and 2030 grid strategies, should see a rebound in enthusiasm for new wind projects.
- Asset and Risk Managers Seeking Options. For merchant renewables, particularly BESS, earnings are down from the highs following Russia’s invasion of Ukraine. It brings greater scrutiny of cost items from asset and risk managers as they seek to maintain margins. It means quotes on new placements and renewals will likely require options across deductibles, limits and indemnity periods. Where applicable, banks will play an important role in any major changes. Lead markets must be prepared to be flexible, particularly on last-minute option requests.