AXIS Report: Risks Impacting the Energy Transition

AXIS Capital Holdings Limited (NYSE: AXS) published a new report, “Navigating Risk in the Energy Transition,” based on independent research. The report examines how key risks, such as climate change, economic volatility, and securing investment, impact the energy transition. Key findings include:

  • Climate change drives and poses risks to companies’ assets and operations.
  • There is a gap between the desire for transition and the logistical reality of meeting net-zero targets.
  • Economic conditions make financing renewable energy projects more challenging.
  • Continued government support is essential for progress.
  • The insurance industry has an opportunity to support the energy transition more strategically.

The report surveyed over 600 energy producers, industrial energy buyers, and specialist insurance brokers in the US and UK. Insights include:

Climate Action:

  • Climate change influences business risks like energy price volatility and supply chain disruption.
  • 69% of industrial energy buyers anticipate climate crisis impacts on business performance.
  • Key drivers for climate action are long-term viability, regulatory compliance, and climate concern.

Strategic Investment:

  • Improving energy efficiency is a key transition investment.
  • Preparedness for the transition is limited, with most feeling only “somewhat prepared” or “not too prepared.”

Renewables Growth:

  • High capital investments and economic conditions are barriers to increasing investment in renewables.
  • Solar technology is the most popular investment area, followed by battery storage and smart grid technology.

Economic Conditions:

  • Rising interest rates and inflation make financing renewable projects more expensive.
  • Energy price volatility is a major risk for industrial energy buyers.

Additional Insights:

  • Public policy has accelerated the energy transition, but further government support is essential.
  • There is a call for governments to create investment incentives and provide financial protection for renewable projects.
  • The insurance industry can play a more strategic role in supporting the energy transition.

Richard Carroll, Global Head of Energy Resilience at AXIS, emphasized the need for significant investment in innovation, risk management, and strategic thinking to achieve net-zero goals. AXIS is committed to working collaboratively with customers and partners to address challenges and seize opportunities for a more resilient, lower-carbon future.

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