COVID-19 and the invasion of Ukraine have disrupted the global energy market and in turn caused several countries to invest in their own oil and gas industries. This threatens walking back on policies to support and grow renewable energy. Such actions have already led to numerous disputes (often subject to 'confidential' arbitration), for example between joint venture partners, and we are likely to see a sharp increase in 2025. For insurers, there is still a risk of price volatility arising from the ongoing invasion of Ukraine, which would have a knock-on effect for energy producers and their insurers, in turn increasing the cost of their policy programmes in respect of critical oil and gas facilities across the globe. While the insurance market – especially the marine and political violence arenas – have stepped up to ensure Ukrainian-linked risks can, where possible, benefit from continued insurance provision, this potential knock-on effect has more wide-reaching consequences.

Germany will be climate-neutral by 2045, according to the Federal Ministry for Economic Affairs and Climate Protection. As a result, it is in the process of reorganising its energy production and the most important goals include: maintaining security of supply, favourable prices for households and companies, and climate-friendly generation without nuclear power and fossil fuels. Such new energy arrangements form the basis for many investment decisions, from grid expansion and the construction of wind and solar plants to the promotion of hydrogen projects. With these come a number of risks. For example, technical and operational risks can arise from wind turbines and solar installation maintenance issues. Environmental and health risks may occur from spills of chemical substances that could contaminate soil and water. Older turbines and/or those in remote areas where access is difficult increase financial risks. Renewable energy systems also contain materials that can be hazardous to the environment and recycling can be challenging.

In 2025, we consider that serial defect losses will continue to present challenges for insurers, who will need to adapt and amend cover to ensure it meets with their risk profile. Significant developments in wind and solar PV projects are providing new and exciting opportunities for clean energy production. However, their infancy in design and rapid developments in technology mean that the risk of insurance claims is significant, particularly in respect of serial defects claims. These types of claims tend to be more prevalent in these types of projects due to the large volume of replicated assets (such as turbines/ solar panels and cables), which are designed, manufactured and installed in the same way. When a defect has occurred with one asset, it is likely to be evident in others in the same project. Many insurers are reacting to such claims by attempting to mitigate their exposure by, for example, including exclusions for these defects, or incorporating sliding scales of indemnity based on the number of losses, but such measures are not perfect and have led to significant losses over the last year.

While the output from renewable energy is green, the same is not true for every aspect of the process. The mining and extraction of rare earth materials required may generate significant carbon emissions and create various additional risks.  Litigation or allegations relating to breaches of sustainability regulations could generate financial losses for companies. These losses may not only be direct, but also as a consequence of reputational harm. Those financial losses could generate claims from shareholders who have been adversely affected, leading to claims under directors and officers policies. Mining and extraction may also involve dangerous working conditions and raise questions around the human rights of inhabitants of these locations. Litigation relating to the placement of renewable energy infrastructure is also likely to increase. There is also a disconnect between the ambition of the circular economy and recycling of equipment that is now reaching end-of-life. Looking forward, managing expectations around renewables should form part for the ambit of risk manager, broker and insurer discussions.

The positive decision for insurers in MOK Petro Energy will see section 11 of the Insurance Act 2015 being given a broad interpretation, it not being necessary in that case to establish a direct causal link between the breach of a policy term and the loss, for cover to be limited. Section 11 requires the breach of a policy term to be relevant to the actual loss if it is relied on to limit cover. MOK breached a warranty requiring a surveyor to inspect and certify shore lines connecting to its vessel. Although inspection occurred, certification did not. Insurers sought to rely on this breach to refuse the claim. MOK argued that the failure to certify was immaterial to the loss. It was decided (obiter) that it was necessary to look at the warranty as a whole. Non-compliance could have increased the risk of loss that actually occurred (water contamination). This provided grounds for insurers successfully to refuse MOK's claim.

Climate change induced increases in extreme weather events coupled with rising sea levels are necessitating ports and terminal operators and their insurers to re-evaluate their range of exposures. Located on exposed coasts or in low lying estuaries, ports have always been vulnerable to windstorms, flooding and storm-surge. Climate change will only increase that vulnerability. This is particularly so with older infrastructure, which was designed and built using now outdated assumptions about extreme weather exposures. For example, once in 200 year storms now arise more frequently. Insurers and risk engineers should work with ports and terminals operators to develop adaption and resilience plans to mitigate against the amplified risks to this critical infrastructure.

The imposition of further sanctions from Western nations against Russia, affecting its oil and gas industry, will cause the dark fleet to remain in operation for the purposes of circumnavigating those sanctions. Most of this dark fleet have substandard maintenance with no insurance, posing a major risk for the environment in case of an oil spillage and a lack of recourse to other vessels following collision incidents. The main risks will come from the highly dangerous and environmentally perilous ship-to-ship transfers on the high seas with no proper oversight. With no realistic end in sight for the Russia-Ukraine conflict, the risks posed by the dark fleet regrettably appear here to stay in the short-medium term and the insurance industry will need to consider the level of capacity it can and will allocate to this area.

Critical supply chains relying on marine transportation in key hubs around the world may face logistical challenges similar to those encountered at the Port of Baltimore earlier this year (when the Francis Scott Key Bridge partially collapsed after being struck by a container ship), causing major disruptions and economic ripple effects on global supply chains. Revisiting guidelines and putting into place robust emergency plans will increase the resilience of supply chains internationally and in turn prevent an increase in ocean freight container shipping rates. Data sharing and the use of AI for managing the inflow of information when redistributing the affected cargo will reduce any negative effects on global supply chains.

Labour's plan to encourage millions of homes to be fitted with solar panels (the so-called rooftop revolution) and create more solar farms will lead to more claims. Technology is developing at pace; initial installation costs are high; not all roofs are suitable; safety and fire risks are high; and the skilled workforce is unlikely to be able to meet anticipated output. While the industry gets to grips with all of this, we predict greater risks for insurers that all stakeholders will need to consider. Construction all risks underwriters need to consider their exposure carefully and ensure wordings and premium accurately reflect the risks involved.

The transition to renewable energy will generate litigation based on the environmental and pollution risks involved in increased mining and extraction of transition-necessary materials. A number of such climate-related actions have been identified as 'just transition' claims. These actions are directed at the behaviour of governments and companies engaged in pursuing the development of renewable energy, while aiming to protect local communities and environments from any adverse effects. One lithium extraction project in the United States is being challenged, despite the extraction method being identified as less-environmentally damaging than traditional mining methods. Looking forward, liability insurers need to be mindful of their exposure to such claims.

PFAS litigation citing environmental contamination and product-related exposures is predicted to rise as states and municipalities in the US enforce regulations and pursue actions regarding contaminated water. However, the prominent multi-district litigation in South Carolina leading the pack has narrowed, both in terms of active defendants (following recent substantial settlements) and scope (focusing on certain classes of alleged bodily injury). Nevertheless, new plaintiff groups will continue to emerge and new defendants will likely also enter the litigation arena as the scientific research and regulatory scrutiny intensifies.

AI capabilities have developed exponentially in the past two years. In particular, advances in generative AI have resulted in this technology leaping to the top of board room opportunity and risk agenda and into the minds of the general public. However, it appears that the roll out of AI systems across organisations has slowed, in part due to complex privacy considerations. As data protection regulators continue to intervene, this trend will continue. As the privacy challenges arising from the use of AI systems crystalise and the regulatory focus increases, the Data Protection Impact Assessment will emerge as a crucial data protection tool.