2024 saw the energy sector navigating an everchanging landscape, and 2025 will be no different. Geopolitical instability, the accelerating energy transition, and technological advancements create both challenges and opportunities for insurers and their clients.
As expected, 2024 saw further investment in renewables. The International Energy Agency reported that global clean energy investment was expected to exceed USD 2 trillion for the first time in 2024. Carbon capture, battery energy storage systems, and hydrogen remain a focus for new technology. The construction of interconnectors is also said to have boomed, enabling countries to share energy resources and ensure energy security. We anticipate that 2025 will see much of the same.
Further pledges were made at COP29 in November 2024, perhaps most significantly the pledge that "all actors" would raise at least $1.3 trillion per year [for what?], with developed countries delivering at least $300 billion per year to developing countries, by 2035. The UK Government has also pledged to decarbonise the UK's electricity system by 2030, with support from the new publicly-owned energy company, Great British Energy (though the viability of this has been questioned).
In keeping with its net zero targets, England made history in September 2024 when the last coal-fired turbine was closed. As the world moves away from fossil fuels, wind (onshore and offshore) and solar continue to represent a significant proportion of global energy generation worldwide. However, there has been much discussion about the need for a diverse range of energy sources to ensure energy security. Noteworthy construction projects in 2025 include Hinkley Point C (the UK's first 'new generation' nuclear power station), the NEOM Hydrogen Project in Saudi Arabia, and the Eastern Green Link 1 (a sub-sea 'electrical superhighway' between East Lothian, Scotland and County Durham).
Much like in previous years, natural catastrophes in 2024 (hail, flooding, earthquakes and hurricanes to name a few) resulted in significant claims in relation to energy infrastructure. Risk modelling will need to account for climate change impacts. Parametric insurance solutions are likely to be considered by insurers and their clients as a way to manage weather-related risks going into 2025.
Finally, 2025 marks the 25th anniversary of WELCAR 2001, which remains the standard wording for offshore construction projects worldwide. Rumblings of WELCAR 2.0 and WINDCAR continue into 2025, as insurers develop new products and facilities and adapt existing wordings to meet the demands of new technology, both in construction and operational phases.
To read the full energy section, download the Global Risks: Horizon Scanning report.
