Critical gaps in the availability and suitability of insurance coverage are hindering Europe's progress towards net zero, according to a report from FERMA.
The study, Insuring the Transition – The Issues Confronting Risk Managers, warns that without adequate risk transfer options, companies could hesitate to commit the billions needed for climate technologies and sustainable business models.
The report follows FERMA’s 2022 white paper and found little improvement since then. Coverage remains limited for newer technologies central to the transition, such as offshore wind, hydrogen, and lithium batteries. Underwriting practices are still shaped largely by regulatory or civil society pressure rather than client needs, while a lack of loss history continued to limit insurers’ appetite for emerging risks.
Valentina Paduano (pictured above, left), FERMA vice president and chair of its Sustainability Committee, said that companies scaling up sustainable operations were doing so without the “safety net” of insurance. Without assurance that transition-related risks could be transferred at a fair cost, she added, businesses might delay investment in climate projects.
The report highlighted examples where insurers had adopted blanket exclusions, such as in the recycling industry where lithium battery fires had increased. According to FERMA, insufficient attention was given to the risk prevention and mitigation measures of individual plants, leaving only the largest and most risk-mature businesses able to secure cover, often at inflated prices. Data scarcity further compounded the issue, as insurers remained reluctant to underwrite risks that lacked actuarial history.
To address the gaps, FERMA called for a fundamental rethink of how insurers approached transition risks. It argued for early collaboration between insurers, brokers, and corporates to generate data during project development, as well as sector-wide information-sharing initiatives. The report also urges insurers to invest in technical expertise to evaluate new risks more proactively and to avoid one-size-fits-all exclusions that disregarded company-specific measures.
Charlotte Hedemark (pictured above, right), president of FERMA, said bridging these protection gaps is essential if insurance is to act as a catalyst rather than a barrier to net-zero. She added that stronger cooperation among insurers, clients, and public authorities would be necessary to expand coverage and align the sector with sustainability goals.
Market data underscores the scale of the challenge. The renewable energy insurance market, valued at $18.8 billion globally, is forecast to grow to $27.2 billion by 2030, with Europe as its largest regional contributor. Yet this expansion still falls far short of the capital required. A joint study by Howden and Boston Consulting Group estimates that $10 trillion in new insurance coverage would be needed to support the $19 trillion in global net-zero investments expected by 2030.
Despite this, competition remains strong in renewables, with excess capacity keeping rates soft across some lines. Analysts suggest this paradox reflects the mismatch between available capital and the highly specific risks emerging technologies presented. Without targeted underwriting and better data, insurers risk continuing to lag behind the transition they were expected to support.
