Two prominent insurance industry leaders, Zurich and Aon, have partnered to introduce a groundbreaking insurance scheme designed to stimulate the growth of the hydrogen sector, a key player in the transition to clean energy.
Focus on Smaller, Underserved Projects
The newly established platform will unite multiple insurers, spearheaded by Zurich, to provide coverage for smaller individual projects with capital expenditures of up to $250 million.
These projects, which often struggle to secure insurance due to their scale, will now have access to a comprehensive range of coverage, from construction to operational risks.
Addressing Growing Concerns in the Insurance Industry
This development comes at a crucial time when concerns are mounting about the insurance industry’s capacity to meet the massive demand for coverage in the green energy sector, estimated to be in the trillions of dollars.
Joseph Peiser, Aon’s global chief executive of commercial risk, emphasized the significance of insurance in making or breaking smaller projects.
Targeting Low-Carbon Hydrogen Production Methods
The insurance facility focuses on two essential low-carbon methods of hydrogen production: steam methane reforming with carbon capture (“blue” hydrogen) and electrolysis using renewable electricity (“green” hydrogen).
Peiser revealed that the facility, two years in the making, is already quoting for its first projects and has the potential to cover 10 to 20 projects annually, with billions in total coverage.
Broad Scope and Comprehensive Coverage
The program is estimated to encompass approximately two-thirds of hydrogen projects, with Zurich leading the insurance coverage on each project in collaboration with other insurers.
Businesses will have the flexibility to purchase coverage for a wide array of risks, including third-party liability during construction and protection against outages once a facility is operational.
Zurich’s Confidence in Hydrogen’s Potential
Sierra Signorelli, chief executive of commercial insurance at Zurich, highlighted the “immense potential” of hydrogen as a sustainable alternative to fossil fuels.
Numerous countries are relying on hydrogen to play a pivotal role in reducing carbon emissions.
Hydrogen has the potential to replace fossil fuels in diverse sectors, ranging from steel production to transportation and heavy industry. However, the current dominance of hydrogen produced from natural gas, which releases carbon dioxide, necessitates a shift towards lower-carbon methods.
Addressing Investment Challenges and Uncertainty
The Zurich-Aon scheme aims to provide comprehensive coverage for various hydrogen infrastructure components, including production, storage, and transportation.
While the insurance industry has historically insured large-scale industrial hydrogen production, the new focus on low-carbon production presents novel risks that require innovative solutions.
A Case Study in Switzerland
In a separate initiative in Switzerland, Zurich is actively participating in a project to insure the construction of 1,600 hydrogen-powered trucks by 2025, showcasing the insurer’s commitment to supporting the development of hydrogen-based transportation.
The Zurich-Aon insurance scheme marks a significant step towards unlocking the potential of hydrogen as a clean energy source, addressing the unique risks associated with smaller-scale projects and paving the way for a more sustainable future.