How Captive Insurance Supports the Energy Transition

How Captive Insurance Supports the Energy Transition
June 24, 2025 10 mins

How Captive Insurance Supports the Energy Transition

How Captive Insurance Supports the Energy Transition

The rapid growth of renewables demands innovative risk solutions. Captive insurance offers a strategic, flexible approach to managing evolving risks — helping energy leaders navigate volatility, optimize capital and unlock new opportunities in the transition to sustainable power.

Key Takeaways
  1. Captive insurance empowers renewable energy companies to take control of risk financing, closing protection gaps left by traditional insurance and supporting ambitious growth.
  2. Strategic use of captives unlocks capital, manages long-term volatility and enables access to innovative solutions for emerging risks like cyber and weather-related events.
  3. A well-structured captive program enhances resilience, investor confidence and financial flexibility — which are crucial for navigating the evolving energy transition landscape.

As the world shifts toward renewable energy sources, traditional insurance models can fail to adequately address the unique risks associated with these innovations. In this environment, captive insurance can be a strategic tool to manage new and emerging risks where there are gaps in the insurance market.

Captives can offer a flexible and tailored approach to risk management that supports a smooth transition to sustainable energy. Using this solution, renewables companies can realize their growth ambitions, meet their environmental, social and economic goals, and protect their reputation and revenue — ultimately creating sustainable value for investors and shareholders. 

Learn about the benefits of using captive insurance for renewables projects.

Tailored Risk Management for Unique Renewable Exposures

One of the key benefits of captive insurance is the ability to create customized insurance policies that address the specific risks faced by companies in the renewable energy sector. Projects, such as wind farms, solar installations and hydroelectric plants, have unique challenges that impact insurance pricing. Captive insurance allows companies to tailor policies to their needs, ensuring comprehensive coverage for their specific risks.

Renewable assets are often exposed to weather events, including wind and hail, and have less historical loss data compared to conventional energy, which makes underwriters overly cautious with them. With captive insurance, companies can have underwriting arrangements specific to their assets and risk appetite. They can leverage their own balance sheet strength and access various risk capital elements, including reinsurance markets and alternative risk transfer techniques. This customization enables companies to combine capital sources as appropriate, optimizing their insurance programs based on budget, risk appetite and available capacity.

15.1%

Renewable power capacity grew at a record annual growth rate of 15.1 percent in 2024.

Source: International Renewable Energy Agency

A Tailored Captive Approach Can Protect Against Cyber Threats

Article

A Tailored Captive Approach Can Protect Against Cyber Threats

The renewables industry faces increasingly sophisticated and frequent cyber attacks targeting infrastructure. Severe cyber threats have impacted major wind turbine manufacturers, prompting them to explore captive insurance as a solution due to its customized approach to risk. Captives provide a tailored approach to managing cyber threats in the energy sector by allowing companies to create a licensed insurance company for their own use, with the flexibility to customize coverage, risk management strategies and cost-effectiveness. This can be particularly useful for energy companies grappling with the unique cyber risks of their industry, including those related to critical infrastructure, data security and regulatory compliance.

Enhancing Financial Stability and Capital Efficiency

Along with helping to mitigate risks, captive insurance can provide financial stability by protecting investments. By retaining the insurance premiums within the captive, renewables companies can build a financial reserve that can be used to cover unexpected losses, ensuring the continuity of the project and the financial health of the company.

Renewable energy projects require substantial upfront investment and have long payback periods. It is essential to demonstrate to financial partners that all insurance arrangements are fully and comprehensively in place for renewable energy assets. However, insurers can apply high deductibles to ensure that the initial loss is borne by the insured due to the lack of historical loss data compared to other energy projects. This creates a gap in insurance coverage, which can pose challenges as financing cannot be released to create or fulfill the asset unless insurance is in place.

Renewable companies have addressed this issue by using captives to buy down the deductible, allowing them to present full, comprehensive insurance across the entire asset base to their financial partners. This approach unlocks additional tranches of financing needed to further develop their assets or complete projects. Without this mechanism, the energy transition would be significantly slowed, as captives play a pivotal role in alleviating capital constraints.  

Quote icon

Captive insurance can be key in the financing value chain of renewables, facilitating the transition and enabling the development of renewable energy assets.

Ciaran Healy
Global Head of Captives, Commercial Risk Solutions

Managing Long-Term Volatility with a Total Cost of Risk Focus 

 

By focusing on total cost of risk (TCOR) containment, captive insurance can help renewables companies manage volatility over the long term. Companies can manage their exposures to cyber and natural catastrophe risks, and structure risk allocation effectively. This is particularly important in regions with high natural catastrophe exposure, such as North America, Australia and Taiwan.

Not only can these structures be used to access parametric policies to address weather exposures that face renewables projects, but also to incubate emerging and new technologies into the captive and use that as the counterfoil to conventional energy assets, which are well known and understood by the insurance markets. Using a captive to blend those two portfolios takes some of the volatility that could make underwriters less comfortable out of the equation.

Using captive capital over time enables companies to demonstrate a track record to the insurance market, opening better capacity and pricing in the future. This approach not only addresses the need for placement over the short term, but also pays dividends three to five years down the line.

By leveraging data tools, such as Aon’s Climate Risk Monitor, renewables companies can gain a comprehensive view of their vulnerabilities, enabling them to implement proactive measures. This helps to both mitigate potential disruptions and build resilience and adaptability in an ever-evolving climate landscape. Such tools also support regulatory compliance, ensuring that companies remain ahead in their sustainability goals. 

Control and Flexibility in an Evolving Market

The insurance market for renewables companies is still developing, with a few dominant players whose influence varies geographically. Consequently, companies can encounter limited options for risk transfer partners, which affects their ability to control their TCOR and risk financing outcomes. 

A captive is a valuable tool to manage TCOR effectively, as it allows clients to negotiate and configure their insurance programs based on risk appetite. This control is particularly important for renewables companies. Without a captive, they may struggle to manage their risk outcomes effectively, especially during renewals when rates could increase due to market conditions. 

Captive insurance also provides flexibility in choosing what risks to retain and how to structure an insurance program. The flexibility inherent in captive insurance allows for continuous adaptation and optimization of policies, ensuring they remain aligned with business goals and growth plans. This flexibility is particularly beneficial as the insurance market softens and insurers implement more restrictive measures.

Quote icon

Relying solely on the traditional insurance market can limit renewables companies’ risk management strategies. Captive insurance allows companies to decide what risks to retain and what to transfer, making it an essential tool in the toolbox.

Guido Benz
CEO Global Renewable Energy, Commercial Risk Solutions

Navigating Regulatory Complexity with Confidence 

    

While captive insurance offers numerous advantages, it can likewise present challenges in the form of regulatory and compliance issues. Companies must navigate complex legal frameworks to establish and maintain captives, ensuring adherence to local and international regulations. This requires a thorough understanding of the legal landscape and the ability to manage compliance effectively.

Jurisdictions like Bermuda, Singapore or Ireland that have established, captive-friendly environments offer favorable regulatory conditions. France has also led the way for new captive formations in Europe, along with Italy.1 Meanwhile, in the United Kingdom, Chancellor of the Exchequer Rachel Reeves announced a consultation on the regulatory regime for UK-domiciled captives in 2024, intending to receive market feedback on the principles which will underpin the overhauled regulation.2 New captive regulations were also introduced in Gibraltar that year to attract new captive business.3

The regulatory process requires demonstrating financial stability by maintaining minimum capital reserves, proving risk-bearing capacity and meeting stringent solvency standards. Fulfilling reporting obligations is critical, as regulators mandate the maintenance of detailed financial statements, annual audits and documentation of risk transfer mechanisms. Regulators also expect well-structured boards, independent oversight and clear frameworks that separate the captive from the parent organization. Tax considerations require companies to navigate related tax regulations and a proper treatment of premiums and claims. 

Ongoing compliance demands an awareness of and adaptation to evolving regulatory landscapes, particularly in growing sectors like renewable energy. “Captive managers can help with this process, allowing companies to leverage the strategic benefits of captive insurance while meeting regulatory requirements,” says Ciaran Healy, Aon’s global head of captives for Commercial Risk Solutions. 

Harnessing the Benefits of Captive Insurance for Solar Energy Projects

Case Study

Harnessing the Benefits of Captive Insurance for Solar Energy Projects

A global solar power developer faced challenges in securing affordable insurance for projects with large-scale risks. Via White Rock,* the developer obtained a suite of insurance solutions using incorporated cell and segregated account facilities that formed an insurance captive, with coverage for solar panel degradation, theft and performance guarantees. The developer achieved cost-savings and obtained key captive benefits without the associated costs, regulatory capital requirements or administrative burden. Funds retained within the captive were allocated to research and development, driving innovation, reducing its carbon footprint, promoting long-term sustainability, and boosting investor and shareholder confidence.

Dispelling Common Myths to Fully Leverage Captive Insurance

Captives as a Strategic Partner in the Energy Transition

Captive insurance is more than a risk transfer tool — it is a strategic enabler that supports the growth, resilience and financial sustainability of renewable energy projects. By customizing coverage, managing long-term volatility and optimizing capital, captives help companies unlock value and accelerate the transition to a low-carbon future.

Ready to Explore Captive Solutions for Your Energy Transition Journey?

Connect with our experts to discover how captive insurance can be tailored to your unique risk landscape and strategic objectives.  

 

*Owned by Aon, the White Rock Group offers clients a diverse suite of insurance solutions through utilization of Protected Cell, Incorporated Cell and Segregated Account facilities.

1 Best’s Market Segment Report: New Domiciles Changing the Landscape for European Captive Insurance Segment, AM Best
2 Captive audience: Will the UK's new captive insurance regime attract global attention?, Hogan Lovells
3 Working group to see new Gibraltar captive law, Captive International

Aon’s Thought Leaders
  • Ciaran Healy
    Global Head of Captives, Commercial Risk Solutions
  • Guido Benz
    CEO Global Renewable Energy, Commercial Risk Solutions

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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