Insurers must help secure financing for clean energy: Ariel Green’s Napiorkowski

Ariel Green, a division of re/insurer Ariel Re, offers investment-grade technology performance insurance (TPI) that is designed to ensure clean energy projects secure financing at competitive rates to facilitate their construction and derisk their operation.

The firm focuses on named perils and aims to eliminate low-probability, high-impact technology risks. This insurance product allows low-cost capital providers, such as banks, to participate in projects without a risk premium applied.

In an interview with Insurance Day, Ariel Green’s managing director, Jan Napiorkowski, says the company launched Lloyd’s first-ever TPI consortium in 2023 by attracting a number of insurance capacity markets that wanted to contribute within clean energy but did not have in-house capabilities.

“They relied on Ariel Green’s experience and expertise to lead the technical underwriting and insurance structuring,” he says. “To support financiers, Ariel Green works closely with equity investors, debt providers and investment funds to cover risks to their projects and/or portfolios that aren’t typically covered by the project owners.”

TPI also supports clean energy technology suppliers, such as manufacturers of photovoltaic modules, batteries and fuel cells, by backstopping their warranties and helping recover losses arising from “inevitable failures”, Napiorkowski says.

Stark choice

With regard to companies facing a stark choice between maintaining their competitiveness and meeting their climate goals, he points to weather-related insurance premiums climbing quickly, whereas technology-related insurance premiums are not.

“This is because weather-related climate disasters are becoming more costly due to human-caused climate change. However, if the clean energy market continues to innovate and commercialise more weather-resilient technologies that also reduce our carbon footprint, we can achieve our climate goals,” Napiorkowski says.

Ariel Green offers TPI policies with up to $150m in aggregate per risk (and more in special circumstances), allowing the major cleantech projects and stakeholders to benefit from meaningful risk transfer.

“Weather-related climate disasters are becoming more costly due to human-caused climate change. However, if the clean energy market continues to innovate and commercialise more weather-resilient technologies that also reduce our carbon footprint, we can achieve our climate goals”
_{Jan Napiorkowski
Ariel Green}

Among existing policies and legislation that support climate finance, Napiorkowski highlights the Inflation Reduction Act in the US. “This provides significant federal incentives that support climate finance and a framework for accelerating the clean energy transition,” he says. “These include the investment tax credit, production tax credit, and carbon reduction targets that benefit many clean energy technologies.”

Re/insurers can facilitate climate finance by offering more capacity to cover clean energy technology risk, he stresses.

“The world is striving to reduce carbon emissions to sustainable levels to help achieve our climate goals. This will require financing in the order of trillions of dollars to make the transition to clean energy,” he says.

Unproved technologies

“A substantial portion of this funding will be directed towards innovative technologies, which by their nature are commercially unproven,” he continues.

“These present considerable ‘technology risk’ due to their potential for underperformance. This risk often acts as a barrier, preventing the access to affordable capital necessary to scale-up clean energy projects. Re/insurers need to provide more capacity for covering this technology risk so that we can achieve our climate goals more quickly.”

Napiorkowski has high hopes for the UN’s next round of climate talks. “Why not have Belém be the Insurance COP? Real estate, healthcare and automobile markets have all been transformed by insurance, which has allowed banks to lend to tens of millions of people who otherwise would not have been able to repay their debt if they had a significant loss/expense,” he says.

He concludes: “This same concept can be applied to clean energy technologies on a large scale to help combat the largest issue of our time: human-caused climate change.”