by Dr. Lars Schernikau: Energy Economist, Commodity Trader, Author of recent book “The Unpopular Truth… about Electricity and the Future of Energy”
When we picture the energy world, most of us think of oil rigs, coal plants, solar farms, or offshore wind turbines. Rarely do we think about the quiet force that makes all of this possible… insurance.
Insurance isn’t just about protecting us from loss, it is also the very foundation that allows industries to exist. Banks won’t finance a ship, a mine, or a power plant unless someone is willing to underwrite the risk.
Without insurance, there is no large-scale financing. Without financing, there is no infrastructure. And without energy infrastructure, there is no modern life.
The shifting landscape of energy insurance
Over the past decade, banks and insurers have been under intense pressure to withdraw from coal, oil, and gas. ESG commitments, climate pledges, and reputational risks pushed them away from the very industries that still today, provide more than 80% of the world’s energy.
The “Net-Zero Banking Alliance” NZBA and “Net-Zero Insurance Alliance” have “suffered” substantial draw backs with more and more institutions suspending memberships. In fact, The UN banking alliance NZBA was finally suspended as big members exited (late-2024/2025) and as withdrawals by US industry leaders and later HSBC, UBS, Barclays and others, hammered the proverbial nail into the coffin.
But reality has a way of asserting itself.
Energy crises, geopolitical shocks, and the simple fact that wind and solar simply cannot supply reliable and affordable energy, have led to a reset in 2025. Insurers and financiers are beginning to return to the market of conventional energy, cautiously, selectively, and often under stricter conditions, but undeniably returning.
Rising risks and but also rising perspective
“Extreme weather events” dominate headlines and insurance risk reports alike. Catastrophes sell papers and today, they also sell policies. Hurricanes, floods, and wildfires, all are presented as proof of looming climate disaster.
The numbers, however, reveal a more nuanced picture.
Although, insured losses from natural disasters have exceeded USD 100 billion annually for several years, against the backdrop of global premiums of around USD 7.5 trillion in 2024, these catastrophe losses usually amount to just 1–2% of global premiums. In fact, both 2023 and 2024 were highly profitable years for the insurance industry despite the “noise”. The bigger picture becomes even clearer when you normalize losses to GDP, showing relatively speaking, societies are becoming safer, not riskier.
Figure 1: 10-year catastrophe losses, insured and uninsured |Source WEF
At the same time, the “green” energy projects that are supposed to save us from climate change are proving tricky to insure. Solar panels shattered by hail. Wind turbines struck by lightning. Offshore farms battered by storms and requiring costly repairs. Premiums for wind and solar projects are climbing… in some cases faster than those for conventional energy projects.😉
Figure 2: Global Weather Disaster Losses as % of GDP until 2024. Source: Prof Pielke
The unpopular truth
The unpopular truth is that we cannot insure or finance a future that does not yet exist. The world still runs on coal, oil, and gas. Pretending otherwise risks undermining energy security, supply chains, and basic human wellbeing.
We must start by being honest, supporting conventional energy responsibly, investing in making our current energy supply cleaner, and avoid turning insurance into a political weapon rather than the economic tool it is meant to be.
Why this matters
Insurance is not just a financial safety net, it is one of the hidden levers of civilization, a driver of global industry. The way insurers and banks act today will contribute to what kind of energy future we can actually build tomorrow.
At its core, the debate on energy is not confined to technology and emissions, but it includes the topic of risks that are insured and those that have to go without… those that qualify for financing and those that fall short.
For the full scoop on insurance and financing link, here my blog post: Insurance and Financing, Energy and Life
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