The Region's Insurers Are Underwriting a Scale Jump They've Never Priced Before

At a special FS Brew episode recorded in collaboration with MEECON 2025, six insurance and energy leaders working across the Middle East's clean energy transition converged on a theme none of them stated outright but all of them kept circling back to: the region's energy projects have scaled up faster than the risk infrastructure built to underwrite them. From capacity modelling to catastrophe data to claims systems, the tools were mostly built for a smaller, slower-moving market -- and they are now being asked to handle billion-dollar, gigawatt-scale risk.

From 100 megawatts to 3 gigawatts, in about a decade

Sean Pearson, underwriting manager and regional construction product leader at Liberty Specialty Markets, put the scale shift in concrete terms. "If we go back 2014, 2015, and we think about power generation in the renewable sector, we were looking at 50 to 100 megawatt installations," he said. "We are now looking at two to three gigawatt installations."

That isn't just a bigger number on a spec sheet -- it directly drives how much capacity reinsurers have to deploy on a single project. Construction insurers write to estimated maximum loss (EML), and as clients increasingly buy delay-in-startup and business-interruption cover on top of the physical asset, the EML calculation that determines required capacity keeps climbing. Sunil Machado, head of power and infrastructure at Lockton, made a related point from the broking side: insurance is typically the second-largest line item on a power project after the physical build itself, yet it's rarely brought into the conversation early enough to shape the project in ways that would actually reduce that cost. "When you embed insurance early into a project design, it's fostering transparency across the ecosystem," he said -- de-risking capital and accelerating timelines rather than just pricing risk after the fact.

Flood, not fire, is the region's real construction-portfolio risk

The most counterintuitive claim of the episode came from Pearson on what's actually driving losses. Ask most people what the top peril is for construction risk in a hot, arid region, and fire is the intuitive answer. It isn't. "Flood is probably the number one loss in the construction portfolio," he said, whether fluvial or pluvial. The region has seen a run of extreme rainfall events over the past decade that older assumptions about MENA being catastrophe-benign didn't anticipate.

The deeper problem is that the tools built to price that risk haven't caught up. "If you look at where some of the really large losses have been in the region, in some of the modelling tools that we use, they still show as little to no flood exposure," Pearson said. Part of that is thin historical data; part of it is structural. Cities in the region are still building out the drainage and flood-control infrastructure that mature markets have had decades to install, so a 1-in-100-year flood event and a 1-in-10-year event don't look nearly as different here as they would in Europe or the US, where natural mitigations blunt the smaller events. Liberty is developing a new tool specifically targeting extreme precipitation exposure in the region because the off-the-shelf models weren't fit for purpose. For utility-scale solar and wind installations in particular -- more exposed to weather events than a conventional oil and gas facility -- that gap between modelled risk and actual risk is a live underwriting problem, not a theoretical one.

Battery storage is a risk instrument now, not just a technology choice

Machado's other central point was about how battery storage itself is being reframed. "Large scale battery energy storage systems [are] more than just the technology to store energy," he said. "In the context of energy transition, it's recognized as a strategic risk management instrument" -- supporting grid stability, enabling renewable integration, and hedging project revenue against volatile pricing, on top of its literal function of storing power.

On the hardware side, lithium-ion remains the mainstay, but Machado pointed to sodium-ion systems as a specific emerging alternative worth watching from a risk perspective: cheaper, more abundant raw material, a shorter and less geopolitically fraught supply chain than lithium, and -- notably for underwriters -- less flammable electrolytes, meaning materially lower thermal-runaway risk than a conventional lithium-ion installation. Kimmens' claims-side view of battery storage risk was consistent with that framing: fires do happen, but they're comparatively straightforward to adjust because the asset is accessible. Hydrogen storage is the more complex emerging risk -- a leak is flammable and, if ignited, tends to escalate to an explosion and fire, and the conversion of hydrogen to and from usable energy adds failure points a straightforward battery installation doesn't have.

The claims side has a data and systems problem of its own

On the loss-adjusting side, Sam Foster, a director at Lloyd Warwick (part of McLarens), described technology reshaping the front end of large energy claims -- drones, video surveys, and 3D digital-twin models that can "memorialize" damage on day one or two after a major loss, then be compared against a pre-loss model to quantify exactly what needs repairing. For a dispute that surfaces 12-18 months later, that comparison can settle an argument about whether a piece of equipment was already damaged before the loss event, rather than relying on memory or paperwork.

But the structural inefficiency Foster flagged is more basic: every insurer, reinsurer, and broker in a subscription market runs its own claims system, and a loss adjuster's report still has to be manually read and re-entered into each of those systems individually. On a large energy risk placed across 40 different subscribing markets, that fragmentation isn't just an annoyance -- it directly delays fee collection for the loss adjuster and, more importantly, delays claims resolution for the insured. "Imagine if somebody paid you... you had to collect that from 40 different people," Foster said of the fee-collection problem alone. His prescription is closer to plumbing than innovation: not a new AI model, but a shared platform standard so that data produced once doesn't need to be re-keyed by every party in the chain.

Julie Kimmens, head of technical risk claims at Star Insurance, offered a useful corrective on how much has actually changed in the renewable claims themselves: not that much, structurally. Policy wordings and exclusions look largely the same whether the insured is a solar farm or a petrochemical plant -- what differs is scale. Renewable losses have generally been smaller than a major refinery or oil and gas loss, though she expects that to shift as wind turbines and solar installations keep growing. On AI specifically, her view echoed Foster's: it can handle high-volume, low-complexity claims and free up experienced adjusters for the genuinely difficult cases, but the face-to-face negotiation over how much an insurer will actually pay isn't going away. "There is too much grey area, judgment," she said.

Parametric insurance's regional data gap, and a liability framework still being written

The legal side of the transition surfaced two harder problems. Heba Tabet, insurance legal counsel at EDF Power Solutions, described the core difficulty in renewable project liability as less a blind spot than a genuine, unresolved uncertainty: with developers, EPC contractors, OEMs, lenders, insurers, and reinsurers all party to a project, establishing who is responsible for what -- and in what sequence warranty coverage sits ahead of insurance coverage -- is "extremely complicated" in practice, even when the contracts appear to say otherwise on paper. Disputes over the LEG exclusion clause, which turns on whether a loss originated in a covered external event or an excluded design/manufacturing defect, compound that uncertainty further.

On parametric insurance -- policies that pay out automatically against a defined trigger rather than requiring proof of loss -- Tabet was candid about a constraint that doesn't get discussed enough regionally: reliable parameters depend on good satellite and sensor data, and the commercial data providers that make parametric triggers work well in the US and Europe don't yet have an equivalent presence here. Developers in the region sometimes have to pay separately just to acquire the data needed to define a workable parameter before they can even evaluate whether a parametric policy is viable. Layered on top of that is a live regulatory question: EU disclosure rules like the Corporate Sustainability Reporting Directive are now forcing companies like EDF to try to forecast insurance premiums across a project's full 25-to-30-year life, and whether certain climate-linked natural perils will remain insurable at all over that horizon is, in her words, "a big issue on the long term" that the industry has not resolved.

What this means for the region

Alan Purbrick, who founded MEECON specifically to examine the region's energy transition on its own terms, framed the broader context well: this is a region that grew out of fossil fuels and is phasing them out on a longer, more deliberate timeline than Europe -- a "grown up" approach, as he called it, that creates a genuinely different risk profile than the one insurers built their models around. Regional data centre capacity is set to roughly double by 2029, desalination remains a massive regional power draw, and nuclear -- specifically small modular reactors -- is drawing serious interest as a dense, long-lived power source for both.

For GCC insurers and brokers, the practical takeaway across all six conversations is the same: the region's energy transition isn't following the playbook built in London, Zurich, or Houston, and the risk tools built there don't automatically transfer. Flood models, parametric data infrastructure, and multi-party liability frameworks all need to be rebuilt for regional conditions rather than imported, and the firms doing that rebuilding now -- rather than waiting for the loss history to force the issue -- are the ones positioned to actually price the gigawatt-scale risk the region is already building.

This post draws on the FS Brew episode At the intersection of Energy and Insurance: FS Brew x MEECON 2025 Special Episode.