There is something ironic in the notion that the region best known for making its fortune from oil and gas might turn out to be the region known as a champion of renewables spending.
This may not be as unlikely or illogical as it might at first sound. After all, the central development visions of many nations in the Middle East are focused on diversification away from hydrocarbons revenues.
Out of necessity, Saudi Arabia, Qatar and the UAE are at the forefront of reducing their national dependence on oil and gas revenues. The question is whether the (re)insurance industry is keeping pace with the developments in the energy sector.
The dawning reality is that the future of energy production in MENA will require quite different sets of insurance cover to protect against quite different sets of risks. Types of cover will vary and consideration will have to be given when setting coverage limits, deductibles and other parameters.
Equally important will be understanding how all of this will apply to alternative energy systems and whether they are commercial, utility or residential.
Where photovoltaic cells are involved, for instance, there might be a need for cover for vulnerability to perils such as wind, hail and sandstorm or a whole raft of solar technology risk management offerings.
Equally important might be battery energy storage systems risk mitigation. Even before any renewable energy is produced, there will be a need for insurance for construction-phase risks.
To produce new forms of cover for these new forms of risk will require data that actuaries can work with in order to be able to price the risk. Far from being a problem, this could be a great opportunity for the insurance sector to be at the forefront of net-zero change in MENA rather than trailing along behind.
A case in point might be Dubai’s $14bn Mohammed bin Rashid Al Maktoum Solar Park, which when completed, will save over 6.5m tons of carbon emissions annually. Saudi Arabia now also has its 1.5GW-capacity Sudair solar park.
The UAE has also allocated $30bn for a ‘catalytic climate investment fund’, an announcement that was made during COP28. The catalytic climate vehicle, ALTÉRRA, “will drive forward international efforts to create a fairer climate finance system, with an emphasis on improving access to funding for the Global South,” according to the PR. Insuring ALTÉRRA will be an opportunity.
Both Saudi Arabia and the UAE appear to be focused on continuing to exploit hydrocarbons for as long as necessary while also investing in clean energy technologies and other resources like hydrogen.
Meanwhile Abu Dhabi has its renewable energy investment vehicle Masdar, which it describes as ‘a global pioneer in advancing clean energy, and a key enabler of the?UAE’s net-zero vision’.
Saudi has ACWA Power which describes itself as ‘a developer, investor, co-owner and operator of a portfolio of power generation and desalinated water production plants with a presence in 13 countries’.
To insurance ears, this should sound like opportunity knocking. M
Paul McNamara
Editorial director
Middle East Insurance Review