Que: How would you assess the current level of insurance coverage for India’s renewable energy and hydropower assets against climate-related risks such as floods, storms, landslides, cloudbursts and extreme rainfall?

Ans: India’s renewable energy assets have a fairly comprehensive insurance framework for climate-related perils. Floods, storms, landslides, cloudbursts and extreme rainfall generally fall under the standard “Act of God” perils covered in property damage policies. In most cases, the coverage is provided on a full sum insured basis, which is fairly comprehensive compared with some international markets where insurers may provide coverage on a first-loss basis.

However, the key exception is hydropower plants, particularly projects located in the Himalayan belt. These projects face a more specific and evolving risk from Glacial Lake Outburst Floods, or GLOFs, and in some cases insurers may apply a sub-limit or first-loss limit specifically for this peril. That is understandable given the scale and concentration of exposure in these locations and the challenges in modelling such risks.

For other renewable assets, such as solar and wind projects, the coverage is generally much more comprehensive and typically includes the major natural catastrophe perils. Of course, the exact protection still depends on the policy wording, project location, risk assessment and applicable deductibles or sub-limits.

So, the broader picture is that renewable energy assets are reasonably well covered against conventional climate-related risks, but the risk landscape is evolving faster in certain segments, particularly Himalayan hydropower, where GLOF exposure requires more specialised underwriting and risk assessment.

Que: The climate-related risks vary across the kinds of projects, for example, solar, onshore and offshore wind, BESS, and hydro projects, as well as region-specific risks. How do insurance policies address these?

Ans: The climate risk is mostly location- and asset-specific, so there is no one-size-fits-all approach to insuring renewable energy projects. A solar project in Rajasthan, an onshore wind farm in Gujarat, an offshore wind project and a hydropower plant in the Himalayan region can all have very different risk profiles.

The standard property insurance policies provide a base level of protection, and there are extensions available to address specific exposures. However, the sub-limits, deductibles and premium pricing can vary depending on the nature and severity of the risk and the location of the project. The underwriting approach therefore becomes very important.

For example, onshore wind turbines face risks such as high winds, lightning and storms, while offshore wind projects have additional exposures because of their marine environment, including extreme weather and challenges around access and repairs. Hydropower projects, particularly in mountainous regions, have a different set of concerns around floods, landslides and GLOFs. Solar projects may have greater exposure to events such as hailstorms, flooding and high winds depending on where they are located. BESS projects also require insurers to look closely at risks associated with battery technology, fire and thermal events.

Before underwriting these risks, insurers typically look at the project design and reports, geographical location, construction and operational details, risk-mitigation measures and historical loss experience. The idea is to understand not just what could go wrong, but also how well the project is equipped to prevent or minimise a loss.

So, the insurance solution is increasingly becoming more risk-specific rather than simply project-specific. The same type of renewable asset can attract different terms depending on where it is located, what its exposure looks like and what its past loss history tells us.

Que: Beyond physical damage to assets, how significant are business-interruption and supply-chain risks for energy companies following extreme weather events, and are these risks adequately covered under existing insurance policies?

Ans: Business interruption is a significant risk for renewable power companies because replacing critical equipment can take considerable time. Solar panels, wind turbines and large hydro equipment often have long lead times, and any delay can extend the period for which a project remains non-operational. That’s why businesses need to clearly map the replacement and delivery timelines of critical equipment while determining the right level of business interruption cover.

Supply chain disruptions have added another layer of risk, particularly with the recent conflicts in the Middle East and challenges around the Red Sea. For hydropower projects, the logistics can be even more complex because large equipment such as turbines has to be transported through difficult terrain, making replacement a time-consuming process.

A business interruption policy is designed to cover the loss of gross profit (net profit plus standing charges or fixed costs) following an insured event such as fire, an Act of God (AOG) peril or machinery breakdown. The cover is generally based on the projected turnover of the business and can be comprehensive in nature. The key is to ensure that the indemnity period reflects the actual time it could take to source, transport and install critical equipment, rather than simply relying on standard timelines.

Que: Are conventional insurance products keeping pace with the changing frequency and severity of climate-related catastrophes, or do energy companies need to rethink how they structure their risk coverage?

Ans: Traditionally, renewable energy risks have largely been covered through conventional indemnity-based policies, which provide fairly comprehensive protection against insured losses. However, the risk landscape is changing with climate change, and we are seeing renewable energy companies rethink how they structure their insurance programmes.

Newer solutions such as parametric insurance are increasingly finding relevance in India. For instance, solar projects can take cover linked to a defined level of solar irradiation, while wind projects can have protection linked to a specified drop in wind speed. The payout is triggered when the agreed parameter crosses a predefined threshold, rather than being linked only to the actual loss assessment.

This can also be particularly useful for hydropower projects. In areas where conventional policies may have sub-limits for risks such as GLOF or earthquake, parametric covers can provide additional protection. For example, covers linked to peak ground acceleration for earthquakes or defined flash-flood events can potentially supplement the limits available under conventional policies.

So, the philosophy around renewable energy insurance is evolving. With catastrophic events occurring at shorter intervals and climate risks becoming more unpredictable, companies are looking beyond simply asking, ‘How much insurance do we have?’ The focus is increasingly on whether the overall insurance programme is aligned with the risks the asset is actually exposed to.

Que: What role can parametric insurance play in India’s energy sector, particularly in providing faster payouts following events such as floods, cyclones or extreme rainfall?

Ans: Parametric insurance is essentially event-based cover and is increasingly relevant for renewable energy companies. It can provide additional protection where conventional policies have restricted coverage, sub-limits or deductibles for certain catastrophic events.

Unlike indemnity-based policies, parametric covers are triggered when a predefined event or parameter crosses an agreed threshold. For example, a specified drop in solar irradiation or wind speed, or a defined level of earthquake intensity or flash flooding. This can be particularly useful for risks such as GLOF or earthquakes, where conventional policies may have sub-limits.

Parametric insurance is therefore not a replacement for conventional cover, but a complementary layer that can help bridge specific protection gaps and provide quicker payouts following defined events.

Que: How important is location-specific climate and catastrophe risk assessment when underwriting renewable energy and hydropower projects, and what factors should developers consider before selecting insurance coverage?

Ans: Location is one of the most important factors in assessing both the viability of a renewable energy project and the risks associated with it. A solar plant needs adequate solar radiation to be commercially viable, while wind projects depend on consistent wind conditions. Similarly, for run-of-the-river hydropower projects, regular water flow is critical.

Once the developer has identified a viable location, insurers assess the broader risk exposure, such as natural catastrophes, flooding, earthquakes, landslides or even terrorism. For instance, solar projects located close to border areas may have additional exposure to military action or terrorism-related risks.

So, location plays a dual role; it determines the project’s ability to generate power and also influences how the insurance programme needs to be structured.

Que: What changes are needed to make climate-risk insurance more accessible, affordable and effective for India’s growing energy infrastructure?

Ans: A lot of renewable energy companies are enquiring about climate risk covers, but only a few are actually buying them today. As more companies start opting for these policies and insurers get more experience in handling claims, we will have a better understanding of how these risks play out in real situations. That will also help build more insurance capacity in the market. Over time, as the product matures and more data becomes available, we could see these covers becoming more practical and affordable for renewable energy companies.