Can We Bear the Risk of Renewables?

With many countries across the world looking at coal and oil substitutes, renewable energy sources are becoming an increasing part of insurers’ and brokers’ portfolios.

The rise in our use of renewable energy, begun decades ago, has only recently reached the spotlight, given the increased pressure to reduce our reliance on coal and hydrocarbons.

This article was firstly published at Leader’s Edge.

“From the broader financial markets and insurance perspective, everything started around 2015, when insurers announced their unfriendly policies towards coal,” says Zviadi Vardosanidze, a Vienna-based managing director at GrECo Specialty. “Insurers began restricting renewals, restricting capacity, and increasing pricing on any project that was connected to coal mining and coal-fired electricity generation. Those policies led to increased interest in renewable energy projects from the financing side.”

Given there was proven technology, insurers’ need to replace legacy conventional power generation policies in their portfolios drove many of them to the renewable energy space, which was perceived as a relatively straightforward class of business.

Meanwhile, various government regulations and subsidies have attracted more interest from investors and producers. In the European Union, for example, the Green Deal policy pledged the equivalent of $1.07 trillion in sustainable investments over the next decade.

The goal is to reduce, by 2030, net greenhouse gas emissions by at least 55% from 1990 levels. The policy has helped investors who had been keen to support renewable energy projects and original equipment manufacturers (OEMs) that began to upscale their capacities and their technological progress. In the United States, it is estimated that the Inflation Reduction Act, passed last year, will sponsor about $600 billion worth of investments, many of them focused on renewable energy and the transition to low-carbon activities.

While the technological improvements brought by OEMs, such as GE, Siemens and Vestas, allow for much larger amounts of renewable energy creation, their increased risks took some insurers by surprise. “When the leading OEMs upscaled their technologies, they quickly doubled or tripled the megawatts of capacity of turbines,” says Pawel Kowalewski, head of energy, power and mining at GrECo Specialty. “Insurers’ portfolios started to deteriorate. Perhaps insurers didn’t predict such fast technological advancements or did not account for the new risks those advancements would bring.”

Not all insurers were caught off guard, Kowalewski says. “While small and regional insurers scaled back their portfolios by changing the terms and conditions and increasing rates to reflect the now increased risk levels, the more savvy insurers that had updated their risk profiles have not made these changes. So, it’s a very interesting point in time for the market as there is some disconnect between some of the local players and the big international players.”

Defining the Niche

Renewable energy is any form of energy derived from natural (and thus renewable) resources. In terms of clean renewable energy, most comes from solar and wind. Other renewable energy sources include geothermal, hydropower, ocean energy and biopower.

Wind Energy

Wind is used to produce electricity by converting the kinetic energy of air in motion into electricity. In modern wind turbines, wind rotates the rotor blades, which converts kinetic energy into rotational energy. This rotational energy is transferred by a shaft attached to the generator, thereby producing electrical energy.

According to the “Renewables 2023 Global Status Report” (GSR), last year more than 77 gigawatts (the equivalent of 77 billion watts) of wind power capacity was added to the world’s grids, increasing the total operating capacity by 9%. Taiwan and China are viewed as high-growth markets when it comes to offshore wind farms. China has a formidable pipeline of projects, costing about $180 billion, that are driven mostly by domestic investment. Meanwhile, Taiwan is attracting more foreign participants and is expected to develop about $20 billion worth of projects. For those two countries alone, according to Marsh, the premiums from such projects are expected to generate $2 billion by 2025.

“There has been impressive growth in wind technologies recently,” Vardosanidze says. “Wind turbine generators have doubled their power-generating capacity in just a couple of years. We used to talk about two to three megawatts generated by onshore wind turbines, while now we are up to six megawatts. Offshore wind generating capacities have increased massively as well. We’re now looking at larger and taller turbines capable of generating between 20 and 25 megawatts.”

Such technological features come with their own disadvantages. In fact, as wind turbine technology scales up, the cost of poor risk and quality management is dramatically increasing. Additionally, insurers are concerned that many new technologies available on the market have been rushed through product development to meet market demand without sufficient prior testing.

Today, Vardosanidze says, the testing for new products is more likely to be done by customers. “This means that, from an insurance perspective, we’re dealing with prototypical technology,” he says.

As a result, most construction and operations claims have risen and will, most likely, continue to rise. This trend has caused insurers to become increasingly risk averse by either increasing premiums or drastically changing terms and conditions, which ultimately means investors will be forced to absorb the cost of unmanaged construction and operations risks directly.

Additionally, there is high need for coverage against losses due to delay in startup, contractor’s error, business interruption and marine cover. The capacity to support these coverages is already available in the market, but as the size and complexity of the offshore wind farms grow, the reinsurance market will need to expand to accommodate such exposures.

Solar Energy

The market for solar renewable energy continued its strong growth in 2022, with both concentrated solar thermal and photovoltaic (PV) projects playing a key part.

Concentrated solar thermal (CSP) power is produced by converting the sun’s energy into high-temperature heat using various mirror configurations. CSP is an indirect method that generates alternating current (AC), which is then distributed on the power network.

Solar photovoltaic (PV) panels convert the sun’s light into electricity by absorbing light and knocking electrons loose, generating a direct electric current (DC). The direct electric current is then converted into AC so it can be distributed on the power network.

Production capacity of CSP increased by 200 megawatts (MW) in 2022 after a decade of having plateaued. In fact, while Spain and the United States invested heavily in CSP in the early 2010s, neither of those markets has added capacity since. There are, however, new projects that have come online or are under construction in emerging markets, including Chile, China, Israel, Morocco, South Africa and the United Arab Emirates.

The solar PV market grew by 243 GW of new installations in 2022, bringing the cumulative global solar PV capacity to over one terawatt—enough to light more than a million homes a year. In 2022, several countries relied on solar PV generation to meet a large share of their electricity demand. For example, nine countries meet at least 10% of their electricity demand via solar PV—Spain leads the pack with 19.1%. Another 22 countries meet 5% of their electricity demand via solar PV, according to the International Energy Agency.

“We’re seeing a lot of solar development in California and the sunshine states, but we’re also seeing projects in the Midwestern states, which have a lot of nat cat risk,” says Josh Jennings, head of inland marine and property programs at Aspen. “In the first half of the year, we’ve had record tornado sightings, which play a huge impact on the severity of damage to solar panel projects.”

Despite the increased investments, the risks that insurers have to account for are often too many to provide enough capacity. Because of this, insurers supporting lots of solar farm construction are doing so on a quota share basis or by pulling capacity together and sharing the risk.

“This will be the new normal for the next several years because we are still managing nat cat aggregations as an industry,” Jennings says. “The only way for this to change is via specialized underwriters that truly understand the nuances in the space, better data collection to understand these assets, and improved predictive modeling.”
While insurers and brokers look at investments in data and technology, they’re also looking at investments in organizational talent. “A lot of talent focused on renewable energy has transitioned from other industries into insurance,” Jennings says. “Some MGAs have deep knowledge and data on solar assets since they’ve been collecting it for the past decade. For example, we work closely with kWh Analytics, a leading insurtech in the solar risk management space, because they have very creative ideas and are leading the charge on how they underwrite and price solar energy projects.”

In addition to existing risks, many of the OEMs that provide these technologies are not profitable. “This is especially true for the leading EU and U.S. players,” Kowalewski says. “This trend brings about a lot of concerns about the viability of those technologies and regarding the service contracts that the OEMs are providing to their clients.”

To mitigate risks coming from possible OEM insolvencies, some carriers have developed new insurance products to allow a constant stream of investments in the renewable energy space. For example, a photovoltaic module performance warranty, which is often offered through the OEMs, provides a bankable backstop to performance metrics guaranteed in a procurement contract. Such a warranty can strengthen the reliability of year-over-year production estimates and provide assurance that obligations will be fulfilled in the event of OEM insolvency. Similarly, a solar production insurance solution can mitigate project-level production risk due to underperformance of PV modules, shortfall in solar irradiance, excessive soiling, and other production losses. This is done by setting a production floor to add additional reliability to the project financial model.

Hydroelectric Energy

Hydroelectric energy harnesses the power of water in motion to generate electricity. In hydroelectric power, water gains potential energy just before it spills over the top of a dam or flows down a hill. That potential energy is converted into kinetic energy by turning the blades of a turbine, which generates electricity.

Despite being often sidelined by the emerging wind and solar energy sources, hydroelectric power (or hydropower) has been a critical source of low-carbon electricity generation for years. According to the International Energy Agency, hydropower supplied one sixth of global electricity generation in 2020, the third-largest source after coal and natural gas. While the IEA forecasts global hydropower capacity to increase by 17% by 2030, it predicts net capacity additions to decrease by 23% compared with the previous decade.

Such contraction—and determinations on the insurability of hydropower projects—are driven by two main concerns: high-profile losses and aging hydropower plants.

Hydropower projects have always been deemed too high-risk due to their complex construction projects, which often combine extensive civil engineering with mechanical works in remote locations. In simpler terms, claims related to hydropower projects, especially during the construction phase, are extremely large. For example, the Ituango Dam, Colombia’s largest hydroelectric project, cost insurers almost $1.4 billion in losses. In 2018, heavy rainfalls and landslides threatened a catastrophic collapse of the structure as the river’s diversion tunnel was blocked. Additionally, the flood caused irreparable damage to the plant’s electromechanical equipment and to the structure of the powerhouse itself.

Due to similar recent claims, some major lead insurers have withdrawn from the sector or significantly restricted cover. Any further reduction in carrier choice may call into question the financing and viability of future hydroelectric projects. “There’s been a tremendous amount of change in the past few years,” Derek Whipple, senior vice president of energy and marine at Alliant, explained in a recent podcast. “Recently, the loss activity has been, on average, greater than the amount of premium coming in from the market. So the industry had to make some adjustments in terms and conditions and pricing to accommodate for those losses and, ultimately, to create a sustainable market.”

In advanced economies, the share of hydropower in electricity generation has been declining, and plants are aging. In North America, the average hydropower plant is nearly 50 years old; in Europe, the average is 45 years. These aging structures need to be modernized so they can contribute to generating electricity for decades to come.

“Aging infrastructure is a challenge we’ve been dealing with for quite some time,” Whipple said in the podcast. “We’re starting to see some investments in this space, but much more of that needs to occur over the next few years to manage this phase.”

Ironically, the biggest risk to renewable energy development is climate change itself. Natural catastrophes, in fact, highly impact the success rate and damage risks of certain renewable energy projects.

Marine Energy

The global ocean (or marine) power sector has continued its journey to commercialization, with significant new funding announcements and an increasing number of successful flagship projects to prove their reliability. While most deployments are pilot projects, a few have advanced to higher technology readiness levels and, most importantly, have developed a pipeline for commercial-scale deployments.

Wave energy projects extract energy from waves on the surface of the water or from wave motion deeper (roughly 30 meters) in the ocean. Surface wave energy technologies capture the kinetic energy in breaking waves, which provide periodic impulses that spin a turbine.

Tidal energy projects force water through a turbine or a “tidal fence” that looks like a set of subway turnstiles. The systems depend on regular tidal activity to generate power, which means tidal energy projects have the advantage of being able to provide a fairly predictable amount of electricity.

Given its early development, the technology has unique characteristics and challenges that set it apart from other renewable energy sources. Insurers are typically reluctant to offer a 100% line, as well as any delay in startup and business interruption coverage for wave and tidal devices/projects.

“How do you insure something like wave and tidal energy projects? It’s still very difficult as, in many cases, you’re likely to go to the marine, energy and renewable energy markets to try and get full capacity coverage,” says Rhys Newland, head of renewable energy and environmental technology for Miller Insurance. “Another issue is that insurers are geared up to ‘old’ hydrocarbon energy. In fact, as an industry, insurers often work in silos where, within energy departments, there is an upstream energy team, a downstream or midstream energy team, plus different departments often for power teams, which are generally geared towards coal or gas power stations, and others. However, the renewable energy specialists are often sitting within the same insurer but in completely different teams and not talking to each other.”

Geothermal Energy

Geothermal energy is derived from thermal and pressure differentials in the earth’s crust, providing direct thermal energy or electricity by use of steam turbines.

Geothermal energy represents a small fraction of the global energy balance and is dwarfed by other renewable energy sources. In a few locations around the world, however, it can represent a valuable and even critical component of the energy mix. Geothermal energy can be hard to reach in most places other than where the earth’s lithospheric plates meet. New technologies are being developed to make this energy source more economically accessible in more locations.

Another critical component of geothermal projects is the resource risk, which is often divided into the short-term risk of not finding an economically sustainable geothermal resource after drilling and the long-term risk of the geothermal resource naturally depleting.

Developers cannot be sure about the success of a planned geothermal project until after drilling into the geothermal reservoir. This risk is often mitigated by local risk insurance funds, such as in Europe. But such funds do not exist in several countries with high prospects for geothermal deployment, rendering new projects more difficult. This is when insurers play a much-needed role by supporting the early drilling phase. One example of such support is Munich Re’s geothermal exploration risk insurance in Kenya, where the insurer helped cover risk on a series of eight wells.


The first distinction to be made when talking about bioenergy is to differentiate traditional from modern bioenergy. Traditional biomass is the largest renewable energy source, accounting for 12.6% of overall energy consumption in 2020, according to renewable energy think tank REN 21. Yet the use of traditional biomass involves the direct combustion of wood, charcoal, cow dung and crop waste in inefficient appliances such as open-fired stoves, which produces air pollution that is harmful to human health.

Modern bioenergy is produced from organic material, which contains carbon absorbed by plants through photosynthesis, such as wood and wood residues, energy crops, crop residues, and organic waste/residues from industry, agriculture, landscape management and households. This biomass is converted to solid, liquid or gaseous fuel which can be used to produce heat, electricity or transport fuel.

An example of a bioenergy project is anaerobic digestion plants, which process organic matter to create biogas. The biogas can be used as is, or it can be upgraded—by adding propane to increase the calorific value—and then be injected into the grid. The gas produced is used to heat homes and can be converted into electricity.

“One of the issues the anaerobic digestion sector has within the U.K. is that it’s not very big,” Carl Gurney, the renewable energy director at Marsh Commercial, said in a previous interview with Leader’s Edge. “There are only around 600 plants and, obviously, that’s not enough to create a balanced portfolio in which insurers are able to withstand large claims.

“On top of that, in the recent past, many insurers have pulled out of the market because of the severity of claims. To put it in perspective, an anaerobic digestion plant may earn 5,000 pounds per hour. So you definitely don’t want that plant offline for long, or the insurer will start ramping up some serious claim money. But despite those difficulties, I’m very optimistic about the industry as it has grown and matured over the past decade.”

Challenges Abound

The existing renewable energy sources are very diverse and at different evolutionary stages, yet they all seem to share three major challenges: vulnerability to weather-related events, connectivity to the existing grid, and their prototypical status.

“Ironically,” Newland says, “the biggest risk to renewable energy development is climate change itself. Natural catastrophes, in fact, highly impact the success rate and damage risks of certain renewable energy projects.”
Once deployed, renewable energy projects come with weather-related vulnerabilities that can hinder performance. Wind turbines, for example, which require the constant presence of wind to generate energy, can be damaged by icy conditions and even, it turns out, by strong winds.

According to WTW’s Renewable Energy Market Review, the greatest influencing factor for the renewable energy market in 2023 was the availability and pricing of natural catastrophe cover. Throughout 2002 reinsurers signaled a constriction in capacity for renewable projects and indicated the need for direct insurers to retain a greater degree of capacity in their portfolios. This caused pre-January 1 renewals to increase by high double-digits, particularly for nat cat property business in North America, where indications showed alarming increases of 20% to 50%.

Insurance capacity for renewable energy projects can vary depending on location. “Within Eastern Europe, insurance capacity for renewable energy projects is plentiful at the moment,” Kowalewski says. “We don’t have the same problems that exist for conventional power. Having said that, there’s little new capacity coming to the market, as, in the past three years, we’ve only seen four major players enter the scene.

“Fortunately, a large part of the GrECo territory has very low nat cat risks, which is great when we talk to carriers, as it’s a great way to balance their renewables portfolio, especially if they have a lot of projects in Texas or Louisiana, which have high nat cat risks.”

Newland says another important issue to consider is the transition to renewable energy—in particular, efforts to integrate a variety of low-carbon energy sources. “It’s important to focus on how new technologies and infrastructures need to fit together to allow for this change to happen,” he says.

Significant investments in grid infrastructure are required to support the electricity produced by renewable sources and to make that electricity available. While traditional forms of energy produce stable (or base) energy loads, energy supply from renewable sources is variable, allowing for shortages or surpluses of energy.

“Current grid systems,” Newland says, “do not cope well with those fluctuations because they are used to a base energy load. So, to not overhaul the grid system, battery storage and other forms of energy storage, which were mainly geared towards storing energy over the long term, are being used as short-term energy storage to balance the peaks and troughs of renewable energy.”

One more challenge shared by all renewable energy sources is that they are often considered prototypical projects. “In the insurance world,” Kowalewski says, “you don’t want to use the term ‘prototypical.’ So there is a gentle way of calling it, which is ‘upscale technology.’ But for all intents and purposes, upscale is prototypical.”
Despite these challenges, the future of renewable energy projects remains bright, thanks to the few insurance players that have continued to support emerging energy sources and their related technologies.

“At the moment,” Newland says, “with many of the new renewable energy technologies, it is very much like insurance research and development, where a few insurers decided to lead the way—regardless of whether it is a risky venue.”


Andrea De Bono

Director of International
The Council of Insurance Agents & Brokers

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UNIQA Group’s Sustainability Journey: Adapting for a Greener Future

In the face of growing environmental challenges and climate change, insurance companies like UNIQA Group are taking significant steps to embrace sustainability. Andreas Rauter, Head of Sustainability, Ethics & Public Affairs at UNIQA, discusses the company’s ecological transformation and its commitment to exceed ESG requirements in a candid interview with Paul Spittau, Head of Carrier Relations & Insurance Mediation at GrECo Group.

The Economic and Environmental Landscape in CEE

Spittau: Mr Rauter, both our companies are operating in Austria, Central, Eastern, and Southeastern Europe. How do you see the overall economic development of the environment/sustainability topics in these regions?

Despite disparities among countries and stakeholders, we observe a growing momentum towards sustainability-oriented services. Global growth projections indicate a shift towards sustainable practices. This needs to be accompanied by regulation and robust financing which must be split between private and public debt. Regulatory and financial frameworks are essential to support the green transition. 

UNIQA’s Commitment to Sustainability

Spittau: What is UNIQA’s general position on sustainability and could you give us more insight into the Group’s existing sustainability strategy and the associated corporate strategy for the future?

UNIQA is committed to fostering a better life through sustainability. We’ve established five core pillars for our sustainability strategy:

  • Investment Policy: We align investments with ESG criteria, continually assess environmental and social impacts, and incorporate science-based targets into our investment decisions.
  • Product Policy Integration: ESG factors are integrated into our product range and underwriting approach, focusing on risk prevention and mitigation. We’re expanding our offerings to include more sustainable and environmentally friendly products. Moreover, we support our customer on the way to become more sustainable by implementing “green” products and embed higher attention on climate related advisory incorporated in the risk assessment process.
  • Exemplary Business Management: We also conduct our own business actions in alignment with environmental and social goals, including reducing emissions and greening our operations.
  • Transparent Reporting: We actively engage with ESG rating agencies to enhance our ESG rating and continually improve our reporting processes.
  • Stakeholder Management: We also maintain an ongoing dialogue with all our stakeholders and their representatives to exchange information about our goals and positions on current ESG issues frequently. This includes political stakeholders, investors, employees and our customers of course.

The UNIQA set-up:  delivering positive impact for customers, investors, employees, and the public.

Spittau: What is your personal focus and are there dedicated people or teams working exclusively around this topic at UNIQA?

My focus is on internal consultation, stakeholder engagement, and external communication with ESG rating agencies. We’ve onboarded over 40 ESG experts to integrate sustainability across various departments, from investment management to product development. Our aim is to reduce risks, offer opportunities, build trust, and contribute positively to our stakeholders.

Spittau: We heard about UNIQA’s focus especially on “Green Hydrogen”. Could you please explain in more detail what this means?

Rauter: While we’re not exclusively focused on “Green Hydrogen,” we recognize its importance in the renewable energy landscape. It plays a role in transitioning industries like green steel production and heavy vehicle transport. We manage associated risks and seize opportunities within these innovative investments, especially given the support from regulations and subsidies.

Fossil fuels vs. renewables: helping clients to transform

Spittau: According to the media, there has been no underwriting of new business for the coal industry since 2019. From 2025, there will also be restrictions for companies that generate electricity from fossil sources. There are industries (e.g., the chemical industry) that cannot simply do without the use of coal for certain processes. Do restrictions also apply to these companies?

Rauter: We stepped away from coal in early 2019 due to its negative environmental impact. All industries will need to adapt, and this will not happen without market pressure. With 2024 we will start to step out from crude oil and natural gas industries. Nevertheless, our underwriting approach is designed to support existing clients during the period of transition. That means we will not step away from clients that have a clear plan to reduce the CO2 emissions according to the “science-based target” initiative plan. 

Spittau: We think that it is very important that risk carriers support their clients and accompany them in their transformation and do not immediately speak of a general exclusion policy. Can you tell us how UNIQA sees its role in driving forward the transformation of its customers in this area, and are there already things being implemented?

Rauter: Engagement is crucial for the transformation of the European economy. We engage with investors and customers, assessing and documenting their progress. Also, we plan to reward sustainable approaches with specific products. 

We even go one step further and integrate ESG-consulting and risk management of new sustainable journeys in our core business model: We are starting in 2024 with our dedicated ESG and risk experts as a vertical of UNIQA Group to support our corporate clients on their way to a greener and more sustainable future. We will communicate more in due time on this project.

Mitigating Risks in Green Energy Transformation

Spittau: What are the biggest risks and how do you prepare? A transformation to green energy presumably sometimes also involves a higher technical risk (e.g., fire hazard, hydrogen, and batteries, etc.)?

Rauter: Actually, the greatest risk is underestimating the need for change. Of course, with new technologies we face different risks. Our approach is to define the required risk standard which enables us to write exposed risks. The philosophy we have is to differentiate exposure and risk quality. Insurance of green energy requires further technical skills and proper assessment of the different risk components. Our ambition is that risk pricing is supported by deeper knowledge and the consequent engagement in these new technologies.

Anticipating Future Green Innovations

Spittau: Finally, I would be interested to know what innovations you expect in the not-too-distant future – “green techs” etc.?

Rauter: We expect progress within Europe in the fields of battery production, photovoltaics techniques, and Green Hydrogen. With all of this accompanied by digitalization and improved autonomy of European technical expertise.

We, as an insurer, are also forced, together with our broker partners, to support our clients more intensely with regards to climate change resilience, ESG correlated risk management, and decarbonization. No matter what role we must play.   

About Andreas Rauter
Andreas Rauter has been working in the insurance industry in various management positions since 2000. He studied at the Vienna University of Economics and Business Administration and began his career in 1989 at international consulting firms where the financial and non-financial reporting of listed companies kept him busy. In the insurance industry he was leading Group Finance at UNIQA for 15 years, before he turned into exploring future challenges for society and the insurance business. He currently heads the Sustainability, Ethics & Public Affairs department at UNIQA Insurance Group AG and focuses on shaping a holistic corporate management approach for meeting future European societal priorities.

About UNIQA Group
The UNIQA Group is one of the leading insurance companies in its core markets of Austria and Central and Eastern Europe (CEE). Around 21,000 employees and exclusive sales partners serve more than 16 million customers across 18 countries. UNIQA is the second largest insurance group in Austria with a market share of about 21 per cent. In the CEE growth region, UNIQA is present in 15 markets. In addition, insurance companies in Switzerland and Liechtenstein are also part of the UNIQA Group.

Andreas Rauter

Head of Sustainability, Ethics & Public Affairs

Paul Spittau

Head of Group Carrier Relations & Insurance Mediation

T +43 664 537 17 42

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Climate Change Meets Corporate Companies. Captives as a Lifeline?

If carefully designed and managed, a captive is a tool in the risk manager’s toolbox for large companies that can help build resilience to future transformation risks as a result of climate change, amongst other things.

Captive insurance solutions offer a sustainable and flexible way for large companies (turnover more than 500 million EUR) to protect themselves against the growing, often unpredictable risks posed by climate change and other global challenges. It is critical for risk managers to consider these solutions today when developing their risk management strategies for tomorrow.
The dynamic changes in large companies’ risk landscapes have continuously revealed the limits of traditional insurance solutions, whether through lack of capacity, or wording exclusions, or unproportioned price increases. Climate change, with primary and secondary transformation risks in tow, is expected to become an increasing challenge for corporate leaders and their risk strategy in the future.

Primary transformation risks are physical climate risks that derive directly from global warming. Extreme weather events such as floods, storms or wildfires can cause substantial damage to companies’ assets and often lead to business interruptions. Recent disasters, such as the August storms in Slovenia, prove this.

Secondary transformation risks are speculative and involve risks and opportunities. They arise from the adaptation of business models (products, applications, processes, techniques) to climate change and thus lead to a change in the risk landscape. For example, the implementation of closed-loop systems, such as recycling and upcycling models, often changes requirements for quality management, logistics structures and liability potentials.
Production processes will also have to be adapted to climate related challenges. The shift in vegetation zones can trigger the risk of drought and bottlenecks in the supply of cooling water. Extreme weather events can lead to power outages or damage to public infrastructure, resulting in production disruptions whose causes are beyond the company’s own control. From the perspective of the affected company, this is a so-called “non-damage business interruption” which is traditionally difficult to insure against. If it is insurable, then it is only related to a narrow exclusion regime and a price far above loss-expectancy.
For risk management, it is essential to recognise the impact of transformation risks on the assets and to improve the resilience of the company in addition to eliminating weak points as best as possible.

When traditional risk transfer fails…

In the future, it will be an even greater challenge for the insurance and reinsurance market to meet its economic, social, and ecological responsibility and provide society and the economy with sufficient cover for transformation risks.
Worldwide natural disasters are already leading to premium increases in traditional insurance solutions. Solely relying on a NatCat-Models provider will not solve the problem of affordable capacity. The situation will continue: high risks will provoke limited capacity for high margined prices.
However, large companies have options. There are proven solutions available to leave the classic risk transfer behind, or at least partial solutions that can be shaped into alternative options.  

Managing tomorrow’s risks sustainably and flexibly

Alternative risk transfer (ART), for example through captives, offers sustainable and flexible solutions, especially where traditional risk transfer reaches its limits. Among large companies, we are increasingly observing a shift in the mind-set towards alternative, innovative risk financing models.

Captives need a long-term commitment (7-10 years at least) by the owner. A captive can be developed over time by further adjusting its flexibility if changes are required by the risk landscape. An equalisation reserve will stretch potential claims payments over time. This is a significant advantage compared to ownership via operating cash flow or balance sheet funds.
Systemic changes such as climate change or geopolitical developments will gain further importance and lead to strategic change.


A captive is an independent re-(in)surance company owned by a corporate company. Worldwide, there are about 9,000 captives in about 70 domiciles. Popular captive regions for European companies are Luxembourg, Ireland, and Malta. About 80% of captives are established as reinsurance companies. In this set-up, a professional primary insurer takes over the usual duties via a fronting arrangement.

Strategic reasons

  • Flexibility: Future growth and changes in business models and the risk landscape require flexible solutions. Captives offer the possibility to customise insurance cover, i.e. to adapt to future – often traditionally uninsurable – risks and to insure them in the long term – regardless of the risk appetite of the insurance market. This also has a smoothing effect on balance sheets for such risks. Captives can make insurance programmes resilient.
  •  Increasing the independence of insurers: Captives are long-term instruments in risk management. They can provide funding to fill “gaps or capacity constraints” in traditional insurance programmes. This can also eliminate or reduce constraints related to natural catastrophes. As the captive matures, the surplus grows, giving it greater capacity to bear risk and further increase independence.
  •  Signalling effect for the insurance market: By bearing risk and establishing a captive, companies signal to the insurance market that they are convinced of the strength of their risk management. This means that a captive combines the interests of the insurance market with those of the companies; this is a strong message and can lead to more strength in negotiations with the insurance market.

    The tough market of the last few years has put additional focus on the financial drivers of captive solutions for companies in heavily affected sectors, such as chemicals/pharmaceuticals or the wood processing industry. Captives at least partially decouple companies from the volatility of the traditional insurance market and stabilise prices.

Financial reasons for alternative solutions

  • Cost control and price stabilisation: If the claims experience’s so called loss ratio is unexceptional and below technical pricing, a captive offers more flexibility related to the risk versus reward and promotes all kinds of active risk management. To a certain extent, premium increases due to market changes can at least partially be absorbed by increasing their own risk retention. Companies can thus better control the costs of their insurance programmes. The prerequisite is a proper functioning risk management system.
  • Optimised risk tolerance at group level: A captive can be used to leverage the group’s risk tolerance, thereby increasing insurance efficiency while protecting smaller subsidiaries or business units when deductibles exceed their risk tolerance.
  •  Direct access to reinsurance markets: As “re-(in)surers”, captives have direct access to reinsurance markets and can benefit from a broader offering where more favourable risk premiums or transaction costs are available. Increasing the captive’s ability to carry more exposure often increases the willingness of reinsurers to offer a more effective risk transfer at better pricing.

Mix the old with the new! Our best practice approach

An intensive examination of the company and its risk profile is always the starting point for change. This includes identifying new, future risks and transforming existing risk profiles into a comprehensive risk landscape with a focus on operational risks, but without limiting them to traditionally insurable risks. Based on the strategic risk forecast of this agile risk management methodology, transformation risks are anticipated at an early stage. This allows suitable cause and effect-related measures (e.g. the identification of an adequate risk transfer) to be initiated in good time. In addition, existing solutions are analysed for effectiveness and cost efficiency.
A risk quantification and simulation by a qualified analytics team forms the basis for an initial assessment of whether ART, e.g. in the form of a captive, can represent an effective solution for the interaction of insurable, partially insurable and non-insurable risks of future risk potentials.
With modern methods of modelling risks, the so-called “sweet spot” (optimal ownership capacity in interaction with classic risk transfer) can be worked out in an “ART pre-study”. If two or more insurance programmes and non-insurable risks are included in the alternative risk transfer, individualised modelling with customised parameters is necessary to consider diversification factors. The insight from the modelling for optimal risk management provides a realistic estimate of the total costs to be expected. This includes the costs within the basic deductible, the self-support via ART and the risk transfer beyond this via classic insurance markets.
In a next step, the structuring of the solutions, the analysis and evaluation of the captive vehicles and the various domiciles can be carried out in detail via a supplementary feasibility study.

The key to everything is patience!

Captives are not a quick fix. In principle, it is important to see a captive as a long-term form of risk financing, because the positive effects are often only visible after a few years. This is especially true when it comes to hedging traditionally uninsurable transformation risks.
The threshold value above which it makes economic sense to operate a captive as a long-term risk management instrument and to carry out the necessary contractual implementation is related to the (future) exposure. In the overall view, the smoothing effect, and the flexibility to be gained in the hedging of substantial – also traditionally non-insurable – risks and the constant increase in independence from the volatile insurance markets usually prevail.
Not infrequently, however, it is precisely this “long-term nature” and the fact that the operation of a company’s own “insurance” is outside its core competencies and thus “alien” to it that are obstacles to the company manager’s decision-making process. In any case, the in-depth examination of transformation risks and the possibilities for overcoming them, also within the framework of a feasibility study, ensures more transparency in the group-wide risk landscape.
If carefully designed and managed, a captive is a tool in the risk manager’s toolbox for large companies that can help build resilience to future transformation risks as a result of climate change, amongst other things.

About Gert Wellhöfer

Gert Wellhöfer is Master of Insurance business and has been working in the industry for about 35 years. He was responsible for the global management of the Allianz Captive as well as consulting international clients on their ART topics. In 2021 he joined Ecclesia Reinsurance Broker where he took over the positions as Managing Director.

Krystle Lippert

Gert Wellhöfer

Managing Director
Ecclesia Reinsurance-Broker GmbH

T+49 170 9140404

Helga Koller

Helga Koller

Strategic Sales Manager GrECo International AG

T +43 664 883 805 10

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Environment in Danger? Opportunities and Risks From a Young Generations’ Point of View

Young people gluing themselves to roads, the Friday for Future movement, Last Generation…
If you have followed the media recently, you are probably aware that the younger generation cares about the environment and their future, and that they are willing to go to the extreme to prove their point.  Even though 70% of the younger generation think that gluing yourself to the street is not the right way to deal with the current situation, the prevailing feeling is that something must be done about climate change (80%)*.
*Data source: Ö3 Youth Study
We asked GrECo’s youngest generation for their opinions:

Sebastian Felber
Account Executive

The world is becoming increasingly uncertain. That’s why it’s so important for companies to look at risk management and insurance. I want to help companies on this journey and work with them to develop the right strategies to improve their resilience.

Only 20% of young people believe that enough is currently being done to combat climate change. More than half believe it is primarily the responsibility of politicians and businesses to find solutions and create the right conditions.
Mihaila Cristian
Account Executive

I chose a career in the insurance industry as a young person because of its inherent stability, the ability to make a meaningful impact on individuals and businesses, its dynamic nature, and the potential for financial success. It aligns with my aspirations and offers a fulfilling and promising career path.

According to the Ö3 youth study, as vegetarianism gains traction, young adults are advocating for veggie-days in schools and universities. It is thought this trend could create a snowball effect, driving plant-based eating, at least a few times a week, beyond campuses and into communities.
Elsa Heine
Account Executive

As a young newcomer in the insurance industry, I particularly appreciate the opportunity to assist people in challenging life situations and provide them with security. This industry allows me to continually learn and evolve in various areas, and I relish the teamwork and collaboration with colleagues to collectively find the best solutions for our clients.

Gen Z is right behind reusing and refurbishing old items. They appreciate the opportunity to reduce electronic waste, and the appeal of getting high-quality gadgets at a lower price aligns with their pragmatic and eco-conscious values.  As a result, refurbished products have surged in popularity in recent years as an enticing alternative to purchasing brand-new items.
Almir Kudic
Account Manager

As an insurance broker, I value the opportunity to assist businesses in ensuring they are optimally protected and financially secure. This role allows me to comprehend the specific needs of various enterprises and offer tailored insurance solutions. I feel fulfilled knowing that I have a positive impact on others’ businesses by helping them guard against unforeseen risks.

Despite enormous technological challenges and great progress in the development of electric cars, according to the Ö3 youth study, two-thirds of Gen Z still want to buy the more conventional combustion engine car. This may be surprising to some since it is precisely the “young” or “last generation” that regularly clings to nostalgia and demands no more than “100 km/h on motorways” and “no new oil and gas projects in Austria”, for example.
Marko Talic
Account Executive

The best insurance is the one you never have to use. Nevertheless, in the world of increasing uncertainty and growing risks it is our task to mitigate the negative impacts of unforseeable events. A big motivation for me is helping companies to strive to ensure a risk-resilient work environment through implementation of adequate risk and insurance related strategies.

The ever-increasing use of AI is spreading across all industries and sectors as we experiment and explore how this novel technology can help us in a myriad of different ways.  From automotive to agriculture, mechanics to media, AI technology is taking the world by storm. 

Oliver Jug

Strategic Sales Manager GrECo International AG

T +43 664 822 27 44

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The Younger Generations Stick Together Against Climate Change

A third of the younger generations believe climate change is the biggest threat of our time, and over half believe they don’t have the power to do anything about it.

This article is part of a series of articles titled “Environment in Danger? Opportunities and Risks From a Young Generations’ Point of View”. Even though 70% of the younger generation think that gluing yourself to the street is not the right way to deal with the current situation, the prevailing feeling is that something must be done about climate change. We asked GrECo’s youngest generation for their opinions.

With approximately two-thirds of the younger generations seriously concerned about climate change and one-third believing it is the greatest threat of our time, it is time for us to sit up and listen.

Only 20% of young people believe that enough is currently being done to combat climate change. More than half believe it is primarily the responsibility of politicians and businesses to find solutions and create the right conditions. Of course, they also see themselves as having a part to play, but they believe that they are not the ones who can make the big changes.  This belief must be curbed.

Opportunities to be harnessed by changing the way we think and act.

Climate change will change the way business is done today, and it is essential that companies should prepare themselves for that.  There are numerous opportunities to be harnessed.  Take renewable energy as an example. As a species, we are predisposed to always look at the negatives but sometimes with fresh thinking those negatives can be turned on their heads. It is undeniable that extreme weather events are increasing and often with devastating results: Storms and heavy rains are leading to catastrophic flooding, which are often swiftly followed by extreme heat waves leading to drought.  However, with innovative thinking these weather phenomena can also be used to one’s advantage. The increase in wind favours wind turbines, and more hours of sunshine can be used to generate electricity. In addition, the increase in temperature allows for earlier harvest times and the cultivation of plants that have until today not been typical in CEE regions. 

Governmental entrepreneurship is another area where thinking differently can really make a difference no matter what generation you’re in.  Government guidelines are often seen as a hassle or hard to implement but the early implementation and flexible adaptation of new legislation can create opportunities for those with an entrepreneurial outlook.  Those who take longer to adopt new legislation are likely to suffer efficiency and competitive advantage losses. Companies and politicians wanting a competitive edge should take early action on climate change and stand out from the crowd.

The Gen Z is more than capable of thinking in these new and pioneering ways and must not leave the catalysts for change up to those already in power or running businesses; and businesses and governments need to listen to Gen Z’s ideas and then harness and utilise them to their advantage.

Risks to be aware of for early legislation adopters.

However, before companies and individuals go headlong into a strategy of being the first to adopt new policies or becoming the leaders in renewable energy capitalising on the changing weather conditions, there are risks to take into consideration. 

Due to the dramatic increase in extreme weather events, it is becoming increasingly important for companies and governments to consider the risks and to protect against them. First, the focus should be on physical measures such as flood barriers, hail protection, and irrigation during dry periods. Second, since not everything can be prevented by physical measures, it is also crucial to cover the remaining financial risks, for example with natural catastrophe insurance coverage, or the creation of pool solutions by governments.

New laws and regulations need to be followed, but companies need to be aware that they can create new liabilities that did not exist before. One example is the European Climate Law, which sets the goal of climate neutrality by 2050. Now each country must implement its own laws to comply with EU regulations. If a country fails, there will be heavy penalties. So new regulations are coming that will affect all of us, but especially those companies that produce a lot of greenhouse gases. If you don’t comply, the consequences are still to be determined, but it is expected that the sanctions will be drastic, because otherwise the government will have to pay high fines to the EU.

Regardless of how well companies and politicians handle the issue of climate change they are inevitably in the media spotlight. As a result, even the smallest misstep can result in all the public’s attention being focused on you if “wrong” statements are made, or ill-thought-out actions are taken. The reputational risk stakes are undeniably high.  You should take precautions against this potential negative publicity and the resulting damage to your reputation and protect yourself accordingly.

Sebastian Felber

Account Executive

T +43 664 962 40 26

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How to Match Artificial Intelligence and Ecology

93.2% of Gen Z feel positive about AI

This article is part of a series of articles titled “Environment in Danger? Opportunities and Risks From a Young Generations’ Point of View”. Even though 70% of the younger generation think that gluing yourself to the street is not the right way to deal with the current situation, the prevailing feeling is that something must be done about climate change. We asked GrECo’s youngest generation for their opinions.

The United Nations has recently indicated that the youth of today have the most positive outlook on Artificial Intelligence (AI) with an astonishing 93.2% stating they feel positive about it, and 68% of those state full trust in this new technology. Furthermore, 80% of the younger generation uses AI tools daily.

How can AI help industries protect the environment?

The ever-increasing use of AI is spreading across all industries and sectors as we experiment and explore how this novel technology can help us in a myriad of different ways.  From automotive to agriculture, mechanics to media, AI technology is taking the world by storm.  It is prevalent in so many different facets of our everyday lives.  Take self-driving cars, for example.  It is believed that because these vehicles rely on AI to plan and take the most efficient routes possible, that it could cut CO2 emissions on the roads in half.

Another example is the agricultural industry which has been benefitting tremendously from this relatively new technology. AI equips farmers with real-time insights into their crops allowing them to treat the crops and optimize resource usage. This practice, for instance, has led to a 30% increase in peanut harvests in India. The application of AI has also been seen in monitoring satellite images and analysing historical agricultural trends which has then led to the accurate prediction of hazardous weather patterns. The really exciting bit is this practice could also be used on a large scale to monitor corporations´ and businesses´ emission targets.

What risks is AI posing the environment and us as individuals?

Despite potentially being a good tool for fighting climate change, AI also has some considerable downsides. Two of which are having a huge environmental impact: Emissions and water consumption.

We previously said that AI in self-driving cars could in theory cut emissions in half, however on the flip side to this, to train a single AI model nearly 300,000 kilograms of carbon dioxide equivalent emissions are released in the atmosphere. Put in perspective, this is equal to five times the lifetime CO2 emissions of an average car in the US.  This knowledge naturally brings the applicability and environmental friendliness of AI into question. Some other potential future considerations are how we power AI farms on renewable energy sources. Since companies are becoming increasingly aware and trying to implement their ESGs, the pollution that AI causes raises the question of practicality and feasibility of developing AI models to the level where they produce more benefits than damage in terms of emissions.

In addition to emissions, AI consumes colossal amounts of water:  Uploading videos to TikTok, asking a question on ChatGPT, and even a google search require huge amounts of electricity in the provider’s data centres. To keep the computers in the data centres from overheating, water is needed. And not just any old water will suffice.  The cooling water needs be of drinking water quality to avoid bacteria and corrosion. According to Microsoft’s latest environmental report, the amount of water the company used worldwide in 2002 was the equivalent to 2,500 Olympic-sized swimming pools worth. It also shows their water consumption in 2022 increased by a dramatic 34% compared to 2021. The knock-on impact on drinking water stocks in the region was therefore considerable. According to the experts, a decisive factor in the increased use of this water is likely to be Microsoft’s increased AI focus and its partnership with the ChatGPT producer OpenAI, for which Microsoft also provides computing capacity.

As if the environmental factors aren’t enough of an eye-opener as to whether Gen Z should so willingly be embracing AI, there are then sociodemographic factors to consider.  For AI to develop, the insertion of immense amounts of data and good processing systems are needed. As the intelligence of the system increases, so does the data available to it. AI may therefore be prone to make unethical or discriminatory decisions. This example was best depicted by Rumman Chowdhury in relation to an applicant´s eligibility to apply for a loan. In the 1930s, banks in Chicago were renowned for not granting loans based on demographic and ethnic criteria. If AI is given all the historical banking data, without specifying gender and race, according to Chowdhury, the software would still be able to pick this information implicitly leading to biased decision-making especially with regards to African American communities in the area. There is no doubt that improper model development and observation can lead to biased decision-making which would in turn cause unexpected consequences and increased responsibilities for companies.

And the risks don’t stop there.  AI is known for its ability to easily breach security standards and infiltrate everyday applications. In fact, 77% of regular tech users use AI powered software daily without even realising it. Since it is extremely easy to disguise an AI app as a genuine online service, it is also very easy to create a data breach and extract data from end users. AI software created with malicious intentions is a very powerful tool for endangering data privacy and will undoubtedly bring certain risks that are currently not even present in the cyber realm. Within digitalization, being able to retrieve sensitive information from individuals and use the next generation AI technology known as “deep fake” could easily lead to identity theft on a level so far unprecedented in our society. Future risks aside, AI software is already in possession of a significant amount of confidential data, and it is not necessarily through theft. Research by Cyberheaven found that 11% of the data employees paste into ChatGPT is confidential.  Employers, businesses, and society as a whole need to take serious steps to introduce regulations and precautionary measures before they happily open the door to AI.

So, what can we conclude from all of this? AI holds both promising benefits and significant challenges. By enabling completely new technologies such as self-driving cars, new complex risks arise. In contrast to that, the risk assessment could be enhanced with the help of AI through data analysis etc. When taking advantage of all the benefits of AI, companies should also strive to navigate it’s concerns such as the environmental impact, ethical decision-making, and security vulnerabilities.

Marko Talic

Account Executive

T+43 664 888 447 96

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Refurbed or Buy New?

62% will buy second-hand clothes and refurbished smartphones because they are cheaper and better for the environment.

This article is part of a series of articles titled “Environment in Danger? Opportunities and Risks From a Young Generations’ Point of View”. Even though 70% of the younger generation think that gluing yourself to the street is not the right way to deal with the current situation, the prevailing feeling is that something must be done about climate change. We asked GrECo’s youngest generation for their opinions.

Gen Z is right behind reusing and refurbishing old items. 62% of them view refurbished products as both a sustainable and cost-effective choice. They appreciate the opportunity to reduce electronic waste, and the appeal of getting high-quality gadgets at a lower price aligns with their pragmatic and eco-conscious values.  As a result, refurbished products have surged in popularity in recent years as an enticing alternative to purchasing brand-new items. This category, encompassing everything from hand-held electronics and household appliances to furniture, typically consists of pre-owned goods that have undergone a rigorous refurbishment process, rendering them akin to near-new condition.

Positive outcomes for companies investing in the ‘nearly new’ trend.

There are not just positives for the environment because of this prevalent ‘reuse things’ attitude.  Yes, purchasing refurbished products helps reduce electronic waste and therefore the overall carbon footprint, and by giving a second life to pre-owned items consumers and companies are contributing to a more sustainable and eco-friendly approach to consumption.  However, it goes beyond that. Refurbished products offer companies a competitive edge by expanding their market reach and appealing to price-conscious consumers. By refurbishing and reselling their own products, companies can tap into a new customer base. This approach also highlights a commitment to sustainability, enhancing the company’s reputation as it actively participates in reducing electronic waste and promoting a circular economy.

However, this isn’t just limited to businesses in certain industries offering a recycling policy on old goods that they can refurbish in return for some money off your next new product.  All companies can use this concept. Buying refurbished mobile phones or laptops for employees is one such way other businesses can help to reduce electronic waste.

New risks arising from refurbished goods.

Overall, the idea of reducing, reusing, and recycling is an unvaryingly positive one, however there are a few new risks arising in this category. Quality assurance is a big concern for many. There are currently no real standards in this area, and every company/industry defines their own degree of wear and tear. For example, what “used” means to one company or individual might mean “heavily worn” to another, or “like new”, which should mean it comes in perfect condition, comes with a few small scratches or marks and might have been better described as “lightly used”. There are definitely discrepancies in these listings from site to site and from vendor to vendor. Furthermore, ensuring the quality and reliability of refurbished products can be challenging, because a hidden defect could remain unidentified by the refurbisher.  All-in-all these factors can lead to customer dissatisfaction, returns and warranty claims.

With refurbished products warranty risks are also increasing.  Many dealers have to offer a warranty on refurbished products by law. Although the warranty period is often shortened in comparison to new items, the quality assurance of the refurbished product might be more difficult as previously described. Companies may need to allocate resources to honour these warranties.  

The final major risk faced by companies in the refurbishing sector is reputational risk.  Eventually, poorly refurbished products, non-standardised qualities, frequent warranty claims, and an untraceable supply chain can harm a company’s reputation, leading to reduced customer trust and brand damage.

It is not only manufacturers and traders who are being called upon to rethink their business models. The insurance industry is also required to come up with new solutions for its clients as well. Conventional solutions will not be sufficient to manage the transformation of this entrepreneurial sector with rapidly changing risks.

Traditionally uninsurable risks such as product warranties or lack of reputation will also require a new perspective from insurers in the future. Furthermore, there’s a big advantage for inventive insurance companies if they can come up with innovative solutions: embedded insurance-products (affinity-solutions) are becoming more and more relevant especially for consumer-related products.

Elsa Heine

Account Executive

T +43 664 192 48 34

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Navigating the Future: Revolutionising Mobility?

82% of Gen Z will buy a car with a combustion engine. 

This article is part of a series of articles titled “Environment in Danger? Opportunities and Risks From a Young Generations’ Point of View”. Even though 70% of the younger generation think that gluing yourself to the street is not the right way to deal with the current situation, the prevailing feeling is that something must be done about climate change. We asked GrECo’s youngest generation for their opinions.

Despite enormous technological challenges and great progress in the development of electric cars, according to the Ö3 youth study, two-thirds of Gen Z still want to buy the more conventional combustion engine car. This may be surprising to some since it is precisely the “young” or “last generation” that regularly clings to nostalgia and demands no more than “100 km/h on motorways” and “no new oil and gas projects in Austria”, for example. The study went on to find that only 24% of the respondents would be willing to give up their cars in the future (due to climate change).

E-mobility advantages for businesses and the economy

These findings raise the question as to how to sensitise today’s youth to the topic of e-mobility.  Particularly because it opens-up many new economic and occupational opportunities for businesses.   

The long-term environmental and health benefits of electromobility leading to cost savings is widely known, but the advantages go beyond saving the planet and reducing pollution.  From an economic standpoint, we can see that many different sectors are benefitting from the rise of e-mobility:  the sales market for electric vehicles is emerging and growing within the automotive arena, as is the rechargeable battery industry due to the increased demand for powerful batteries; and second-life and end-of-life batteries are offering an opportunity for the reuse and recycling industry. Companies and investors in the field of infrastructure are profiting from electromobility because there’s a tremendous growth opportunity in the development of charging station networks.  Whilst the integration of electric vehicles into the power grid supports the expansion of renewable energies.  What is more, electromobility is increasing the demand for technology and software development for advanced charging management systems and autonomous driving.  When it comes to jobs, all this growth means there are a wealth of new careers in these various industries as new specialised services are opening-up as companies adapt to e-mobility.

All-in-all, the growing trend towards electromobility points to a promising future in economic terms. However, e-mobility isn’t all roses! Alongside the plethora of advantages comes a flurry of new challenges and risks. 

New tech equals new risks for companies.

As with all rapid growth and significant change there are new challenges that arise that we must face head-on and overcome.  E-mobility is no different.  One such challenge is how much pressure the existing and new charging infrastructure will put on the electric grid.  With an increasing number of electric vehicles, the existing charging infrastructure could easily become overloaded, especially in densely populated areas or during large events. This could have a huge knock-on-effect with a power outage effecting businesses and members of the public alike.  It is essential for the energy industry to reinforce the power grid sufficiently to cope with the increasing demand for electricity.

Autonomous driving also presents new concerns. The electrification of vehicles often goes hand-in-hand with the emergence of autonomous driving systems. Still considered in their infancy, this new technology raises questions about safety on the road with some drivers driving manually and others autonomously. The risk of possible technology malfunctions whilst driving or the susceptibility to cyber-attacks are also causing trepidation. 

There has been much debate about the true environmental benefits of electric vehicles.  Yes, they commendably reduce CO2 emissions, but from a sustainability point of view are we causing more damage to the earth through the indiscriminate sourcing of raw materials?  The production of batteries requires the mining of certain raw materials such as lithium, cobalt, and nickel. Sourcing these materials poses environmental and social challenges, such as depleting already dwindling natural resources, pollution from the toxic fumes released during the mining process, the increased carbon footprint to deliver the batteries, and working conditions in the mines.

These risk areas show that the introduction of electromobility is not without challenges. It is important that governments, industry, and society recognise these risks and take appropriate measures to promote sustainable and safe electromobility. Society, particularly the younger generation, also needs to be better informed of just how these measures are being carried out to convince them of how these technological innovations are of a true benefit to the environment and the slowing down of climate change.

Almir Kudic

Account Manager

T +43 664 822 26 54

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Being Non-veggie Is Not Okay?!

62% of the younger generation believe being vegetarian is a good way to help save the environment.

This article is part of a series of articles titled “Environment in Danger? Opportunities and Risks From a Young Generations’ Point of View”. Even though 70% of the younger generation think that gluing yourself to the street is not the right way to deal with the current situation, the prevailing feeling is that something must be done about climate change. We asked GrECo’s youngest generation for their opinions.

According to the Ö3 youth study, as vegetarianism gains traction, young adults are advocating for veggie-days in schools and universities. It is thought this trend could create a snowball effect, driving plant-based eating, at least a few times a week, beyond campuses and into communities.

Opportunities for growth in the vegetarian food sector.

The rising demand for plant-based meals presents opportunities for companies in the vegetarian market, influencing the economy and promoting sustainable food choices.

Companies who embrace vegetarianism are tapping into a rapidly growing market of health-conscious and environmentally aware consumers.  By offering a wide range of plant-based products companies can diversify their portfolio and reduce their reliance on traditional, more expensive, meat-based offerings.  This in turn leads to a rise in innovation across the sector.   Developing appealing vegetarian alternatives encourages companies to invest in research, driving product excellence and competitive advantages, whilst also positioning themselves as environmentally responsible, attracting eco-conscious consumers and enhancing their brand image.

The rise in vegetarianism goes hand-in-hand with another growing trend for regional foods.  In today’s business landscape, regionality offers companies a powerful advantage. It means sourcing materials and ingredients locally, reducing transportation distances, and operating closer to the customer. This approach translates to shorter supply chains, leading to lower costs and reduced carbon emissions, and it enhances supply chain resilience, making companies less vulnerable to disruptions. Moreover, being close to the customer fosters deeper connections and insights into local markets, enabling quicker responses to changing demands. In essence, regionality isn’t just about sustainability; it’s a strategic move that bolsters a company’s competitive position while contributing to a more agile and eco-friendly economy.

There are further competitive advantages to be had through vegetarianism for those not in the food industry.  Companies could use the increasing demand for vegetarian dishes to position themselves as attractive employers, signalling to employees that the company values diversity and respects their individual choices and beliefs, including dietary ones. As vegetarian options are often associated with healthier eating habits, providing these choices fosters a positive image of the company as one that cares about its employees’ health. Companies that offer vegetarian food options in their canteens can position themselves as environmentally conscious, which can appeal to employees who share these values. This might help to attract top talent by offering unique and appealing benefits such as a diverse and high-quality food programme.

The rise in vegetarianism leads to new risks for business

You could be forgiven for thinking that an increase in the popularity of plant-based food can’t have that many risks for a business.  Yet, there are still new risks arising from this fairly innocuous trend.  The biggest challenges for the food industry come from the supply chain.  Shifting to vegetarian products may require new sourcing strategies and could lead to supply chain complexities, such as the risks associated with sourcing raw ingredients that do not grow locally due to climatic conditions, such as almonds or avocados in CEE, as well as sourcing ingredients from sustainable sources and without pesticides. 

Other disruptions to the supply chain can occur due to natural hazards like hailstorms, heatwaves, droughts, and floods that can destroy entire crops. These unpredictable events can lead to significant financial losses and chaos in the product supply chain, emphasising the importance of protective measures, resilient farming practices, and insurance to safeguard operations and maintain a stable food supply chain.

As companies aim to meet rising demand for raw materials in agriculture, they may turn to genetic modification. However, this approach carries risks, including potential damage to their reputation due to consumer distrust. Additionally, insurers often don’t cover genetically modified products, leaving companies vulnerable to financial liabilities. Balancing innovation with public perception is crucial and underlines the need for transparent communication and responsible agricultural practices to mitigate these risks.

One other risk faced by companies providing plant-based products is that of allergies and intolerances. With more individuals developing allergies to common plant ingredients, incorrect product labelling can result in allergic reactions and harm to consumers. To mitigate this risk, precise and transparent labelling is essential, ensuring consumer safety, safeguarding a company’s reputation, and reducing potential legal liabilities.

Essential questions to ask ourselves are: who takes responsibility when there are increasingly more natural disasters but at the same time, more agricultural land is needed? Who bears the risk of increasing food intolerances or allergies, not to mention genetic changes caused by genetically modified foods? It is not only the food industry but especially politics, employers and the insurance industry who are asked to find solutions for our changing behaviour.

Cristian-Mihai Mihaila

Account Executive

T +43 664 888 44 778

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Strategic Resilience – Environment in Danger

Companies need to think through these topics on time and think them through strategically, so they can build up strategic competitive advantages

Companies face a variety of challenges. In a business environment characterised by multiple ongoing, simultaneous crises, managers can easily lose sight of what is happening from above. To be able to strategically align your company to the opportunities of the future in a timely manner, a strategic view of the profound transformation processes that are currently taking place is necessary.

The strategic framework affecting companies

Two of these profound transformation processes are currently overlapping as they unfold. They represent technical-ecological paradigm shifts that not only fundamentally change the rules of the economy, but also reflect the increasing development of a profound change in society’s values.

One paradigm shift concerns the unfolding wave of digitalisation, which began around the mid-1990s with the emergence of the internet and is now moving into the next phase. This phase concerns topics such as quantum computers, artificial general intelligence, crypto as a payment system and basis for uniform ownership rights, as well as the topic of physical/virtual immersion, which can be summarised under the term metaverse. What these topics have in common is that they will bring with them commercial availability in the next few years along with opportunities that are difficult to imagine today.  However, forward-looking companies must prepare for them and prepare today.

The second paradigm shift is that of sustainability. This is currently showing increasing momentum, driven by the European Union’s immediate goals for decarbonization, as well as the 2030 Agenda regarding the 17 Sustainable Development Goals (SDGs). Europe has set itself the goal of becoming the world’s first climate-neutral continent by 2050, with the interim goal of reducing emissions by 55% by 2030 compared to 1990. Here too, this means that companies are under immediate pressure to act.

The third aspect that companies have to take into account are crises. The multitude of ongoing disruptions in recent years has coined the terms polycrisis and permacrisis demonstrating that they have become a normal part of everyday life. These disastrous events often come unexpectedly, and the extent of the individual crises is unimaginably high.  Nevertheless, managers must incorporate them into their strategic considerations and be prepared to deal with them. Recent crises have included the Corona crisis, the supply chain crisis, geopolitical crises, the crisis of increased inflation coupled with economic stagnation and, depending on the country, even recession.

The need for strategic resilience

Companies must take these framework conditions into account to secure and expand their future competitiveness. A strategic look at the opportunities of the overlapping paradigm shifts of the unfolding next phase of digitalisation with that of sustainability is necessary. Only companies that identify these opportunities in a timely manner and align themselves with them in a timely and proactive way will also benefit from them economically. Focusing on opportunities is an essential factor in strengthening the company’s strategic resilience when dealing with ongoing crises. This enables companies to process unexpected shocks, realign themselves more quickly and consistently seize opportunities.

 Strategic resilience combines hard and soft factors and is an emerging management discipline. In a forward-oriented view, it combines levers such as aligning on a continuously redefining core business, such as eliminating non-core businesses and structurally reducing the fixed costs while at the same time substantially increasing financial reserves. It rethinks the business model centring around a net zero growth plan and innovation, and elevates the corporate purpose, diversity and inclusion and agility within the company. The ability to communicate clearly, authentically, and continuously with targeted storylines becomes strategically relevant for distinguishing companies and building up differentiation advantages.

How to deal with an environment in danger

 A key driver of change and thus key motivator to increase the strategic resilience of your company is not limited to, but certainly includes the topic of E within the ESG structure. It stands for environment and comprises the segments of energy use, water use, waste management, biodiversity, and greenhouse gas emissions. It is a necessity to act on these topics, but it can also offer opportunities to build up strategic competitive advantages for companies.

The targets are set: reducing greenhouse gas emissions to net zero by the year 2050 with the near-term target of -55% compared to the year 1990 by 2030. However, the calculation of the carbon footprint of companies will have to include all emissions scopes (scopes 1, 2 & 3), meaning that the entire supply chain will have to be incorporated. For most of the companies, scope 3 makes up the by far dominant part of its emissions. This leaves companies with the fact that they will have to tackle the supply chain issue strategically to turn emissions reductions into the right dimensions and to reduce risks. This fact alone will lead to the need to rethink the own business model regarding the origin, the use, the reuse, and the recycling of resources and will become a major risk factor in need of timely mitigation.

Furthermore, energy independence will become an increasingly important topic of strategic resilience and reduce risks for companies regarding energy supply. When considering the use of water, it is all about finding ways to reduce the usage to a minimum and to divide water use by drinking water and industrial usage. With regards to materials, it is about reducing the need for them to a minimum and avoiding waste along the way, as well as about reusing materials at the beginning and the end of industrial processes, thus prolonging the lifetime of materials in general. One specific aspect concerns the usage of plastics, as there is a lot of energy needed to produce them, but the usage is often very short and the afterlife unproportionally long – a good case for the cycling economy, if the right partner network is set. As a first step, any single use plastic should be eliminated as of tomorrow.

This leads us to the topic of biodiversity. Even though often unknown and underrated, biodiversity is a core enabler for many biological processes and affects food variety and security as well as the availability of raw materials. Therefore, it is of utmost importance, to work scientifically on securing and advancing biodiversity in areas which can be influenced by the company. Scientifically because it is a difficult topic to be understood and demands specific expertise.

Recommendations for companies

Companies need to think through these topics on time and think them through strategically, so they can build up strategic competitive advantages. For this purpose, the concept of double materiality needs to be followed:

  • the outside-in perspective assesses risk related to the company caused by e.g. external climate impacts such as floodings.
  • The inside-out perspective assesses the risks for the company caused by their own activities creating harm to the environment such as interventions into nature.

This implies increasing the strategic resilience of the company, identifying risks on time, and providing mitigation strategies which are incorporated into the strategic initiatives of the company. In addition to that, companies need to start thinking more strategically about opportunities in time, and identify, where competitive advantages can be built up in an increasingly challenging environment.

About Vladimir Preveden:
Dr. Vladimir Preveden is an advisor for strategic transformation and has supported more than 200 companies in the DACH region as well as in Central and Eastern Europe in this role. After 20 years at Roland Berger, much of it in various management functions, he has been working independently for several years and focuses on topics of strategic resilience and sustainability transformation. He also teaches at the WU Executive Academy in Vienna. Dr. Vladimir Preveden is married and has three children.


Dr. Vladimir Preveden

Advisor for strategic transformation

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