Navigating the energy transition: supporting the risk management community

As a global carrier, we have customers all over the world facing different transition challenges and impacts. We believe in working collaboratively with our customers – partnering with them to share information, and advising them, helping them make informed risk choices and giving security to those choices through our products and services. 

Liberty is a market-leading provider of insurance products for the growing renewables energy industry, with a focus on Europe, the Middle East and Africa.

In 2023 Liberty established an Energy Transition Risk team to address emerging transition and decarbonisation risks for Liberty Mutual Insurance’s commercial insurance clients and our business. Alongside Liberty’s investment arm, this team is responsible for setting the group strategy on energy transition. It's also responsible for identifying areas of opportunity and threat and for upskilling our teams in identifying, managing and insuring emerging risks from transition and decarbonisation. 

We are now at the investment stage, forming partnerships with government agencies, tech developers, academia, and capital providers, working collaboratively to understand the true nature of evolving transition risks and ideating on potential solutions. 

We continue to monitor emerging trends in public policy and regulation, financing flows and technology developments; the three key drivers of transition and provide regular updates to our clients, colleagues and partners.    

Most importantly the group is poised to support our clients along their transition journeys and in their decarbonisation activities. We are sponsoring the development of new products and services and optimising our existing product and service suite to meet the emerging client needs in this evolving risk landscape. For example, we recently conducted an exercise with our Surety colleagues to identify key client emerging transition risk needs which were not being met by existing products and services, but could be met either by expanding our existing offerings or by new surety/guarantee products. We are now engaged in a three-month sprint to bring new products to market to meet the needs of clients engaged in the design, deployment, operation and decommissioning of renewables and other emerging climate technologies.

In October, at Liberty’s inaugural European Risk Management Forum on Energy Transition in Geneva, risk managers and industry experts shared their views on how, where and why new risks are manifesting through transition and decarbonisation. A leading panel of external energy sector experts helped shape our thinking on how best to identify, assess and manage these risks. Risk Managers voiced their concerns around the strategic challenges they face and gain useful perspectives from peers into how to mitigate those.

The roundtable was a great opportunity for the Energy Transition Risk team to share the findings and insights of the Energy Transition Risk from a year of discovery work with our clients, providing a forum for dialog across the energy transition value chain. Risk managers from extractive industries, integrated energy suppliers, power generation, logistics, engineering, construction, technology designers and developers, pure play renewables and recycling sectors joined to provide deep insights into emerging risks across the energy transition value chain.

Drivers of the transition: policy 

Guest speakers Signum Global Advisors discussed the changing public policy landscape and geopolitical risks impacting the energy transition. Signum outlined the pressing risks around the geopolitics of supply chains, including the EU’s dependence on specific countries for critical materials and rare earth elements. They outlined the direction of EU industrial and energy policy in light of recent elections, the outlook and impacts of Carbon Border Adjustment Mechanism (CBAM) on trade and regional carbon pricing and the potential risk implications of both outcomes ahead of the US elections, with focus on changes to US industrial and trade policy including outlook for the Inflation Reduction Act. Managing the transition against an evolving geopolitical risk landscape highlighted the need for risk managers to build flexibility into their plans.

Drivers of the transition: technology 

Our panel session on technology brought together two bodies who have made significant investment in building cross-sector collaborations to map the barriers to wide scale deployment of emerging technologies: The Geneva Association and The U.S. Department of Energy. The discussion focused on insurance as a pre-requisite for private and public project finance, the challenges of underwriting prototypical technology and how insurers, developers, risk managers and finance partners can come together to create a route to insurability.

In 2023, we engaged in a major initiative of with The Geneva Association, the strategic think tank of the insurance industry, whose members are 86 CEOs of largest insurance and reinsurance companies. The cross sectoral partnerships facilitated by the Geneva Association with the Department of Energy, and other partners, help pave the way for member engagement in this space. Building on cross sectoral partnerships with the US Department of Energy and Breakthrough Energy among others, we contributed to developing innovative risk management solutions to frame and manage untested risks to help unlock capital and expedite market readiness of emerging climate technologies. Specifically, this collaboration has led to creation of an Insurability Readiness Framework which is a holistic taxonomy of risks and key issues from insurance lens that need to be considered by climate tech stakeholders to assess insurability and related challenges for emerging technologies. The Geneva Association highlighted the role of property and casualty insurers in expediting the deployment of emerging technologies, and the importance of engagement between insurance companies and risk engineers, from demonstration and early deployment stages, in their partnership,  from as early as first-of-a-kind pilots. Through this partnership, Liberty Mutual is engaging with a number of other platforms to work on technologies such as carbon capture, utilisation and storage (CCUS), industrial decarbonisation, and geothermal, among others.

The U.S. Department of Energy (DOE) (Office of Clean Energy Demonstrations and Office of Fossil Energy and Carbon Management) described the roles of the various bodies of the US DOE in supporting the deployment and wide scaled adoption of emerging technologies including offshore wind, battery and energy storage systems, virtual power plants, new nuclear, green hydrogen and carbon capture, utilisation and storage (CCUS). 

We’ve been working as a group very closely with the DOE on supporting a number of those technologies and our collaboration with them has taken us to the White House, for discussions around new geothermal energy development which we are now supporting with insurance capacity.  

We had a session with the Office of Fossil Energy and Carbon Management outlining how DOE funded predictive modelling of both loss of containment and induced seismicity from carbon dioxide injection and sequestration could be used by CCUS project developers and insurers to better understand, assess, mitigate risk and manage risk. 

Drivers of the transition: finance and emerging risk

The Kearney Energy Transition Institute, key contributors to the Statistical Review of World Energy 2024, provided risk managers their insights from this authoritative report on world energy markets. They explored recent economic, geopolitical, and technological breakthroughs impacting the pace and nature of the global transition away from fossil fuels. Insights included global and regional energy consumption statistics, an analysis of the main sources of energy globally and by regional, and an outlook for renewables and emerging technology deployment.

Praedicat, a Moody’s company, talked us through “Emerging Risks: The Known Unknowns”. They looked at the ways in which liability risks start to manifest themselves long before litigation emerges and shared a risk identification and assessment framework for risk managers. Key risks discussed included environmental pollutants like biodegradable plastics, carbon capture and storage, nanotechnology, and diesel emissions. The session concluded with a call for collaboration between insurers and their insureds to address these emerging risks.

The future is bright: working together to navigate the transition

The energy transition is too complex for any company to handle alone. In addition, there’s not a ‘one size fits all’ strategy; companies can benefit enormously from insights from leading thinkers in their sector and others beyond to develop the strategies that are right for their businesses. Insights from the risk management community are invaluable as we develop our understanding of the range of technologies that are being developed, potential deployment opportunities and the level of projected and committed  investment in them. Our expertise and knowledge of those technologies will help us focus on where we can bring more value and insights to our clients and partners.

Constant collaboration, information sharing, and learning will be imperative as we navigate the energy transition. We must collectively explore how risk management practices, risk financing solutions insurance products and services might evolve to solve for the needs of emerging technologies; open-source data platforms, risk identification and assessment frameworks, safety standards, codes of practice and sharing of best-in-class risk mitigation measures will all be needed together with innovative insurance products and alternative risk financing structures.

Liberty will continue to use its global, long-term expertise to facilitate transparency and collaboration between clients, brokers and allies. This way, we can ensure partnerships weather the storm of energy transition. 

[1]  For more examples and sources, see: The Geneva Association, 2024. Bringing Climate Tech to Market: The Powerful Role of Insurance.  Golnaraghi, M., H. Dimpflmaier, S. Thumm, J. Warton, L. Harding, A. Delargy, T. Krismer, E. Rauch, T. Dickson, M. Giachino, A. Norfolk, M. Repmann, M. Senac-Gayarre, J. Meister, G. Martin, F.  Nieuwenhuijs and I. Belanche-Guadas. Zurich.