The often overlooked Clean Industry Bonus (CIB), which is a financial incentive linked to AR7 for developers that support UK supply chains, means that increased indirect investment in the wider enabling industries is expected in the UK as well. This may take the form of construction projects that expand the capabilities of equipment and cable manufacturers, upgrades to ports and maintenance facilities and much more. Crucially the scale of the public money to deliver the CIB is expected to be exceeded more than 10 times by private levels of funding.

The greenlight for these projects, in addition to those necessary supplementary projects, such as those delivering the once-in-a-generation upgrades to the UK’s electricity grid infrastructure already underway and the increase in the deployment of utility-scale battery storage, means that the levels of investment in accompanying construction are expected to rise and with it the associated insurance needs.

The insurance industry will continue to support the expected increase in construction activity in various ways. Including through the traditional physical damage covers and by providing security for lenders who finance projects to facilitate the deployment of capital. They will also consider offering more novel insurance products such as parametrics, some of which can provide more cash-flow certainty with payouts based on predefined triggers of solar irradiance levels or wind speed for example. The latter may become more interesting to developers as the prospects of wind drought in the North Sea have become a risk considered by many such projects’ business models.

In the immediate future, insurers are quickly developing their underwriting models to account for larger wind turbines and evolving battery chemistries as well as other emerging technologies in energy from waste, biomass and geothermal sectors. Insurance can be a source of competitive advantage when it facilitates not only the transfer of risk away from projects, but also when insurance is structured to provide cost advantages a project’s business-case economics.

To discuss this matter further, please contact a specialist of the Construction team.