Impact Insurance

There’s an agreed-upon need for more energy infrastructure in this country, and that has become a broad consensus in the last couple of years with the rise of AI and EVs and electrification of heat—heat pumps, for example. These are all good things, and we need an all-of-the-above energy strategy. It doesn’t matter if you call it energy dominance or energy security or clean energy. We’re all working towards the same thing.

There are certain risks involved in that deployment, regardless of the type of technology. We have issues around permitting and timing of completion, around supply chain, around natural disasters, around normal challenges that exist in any project—interest rates, uncertainty in general. There’s both an acknowledged need and a wide variety of acknowledged challenges. And the nuanced take here is we think insurance can really play a role in addressing many of those challenges.

Insurance is necessary for commerce. It doesn’t matter what you’re building. And we think there’s a lot of parallels. Insurance is kind of like electricity, especially reinsurance. You don’t always notice it until you can’t get it, and then it’s a real problem. And so, we’re here with GreenieRE to provide support for risks that might be holding back the deployment of domestic energy infrastructure.

There’s a lot of leadership that’s been demonstrated from the existing insurance community of tackling risks in clean energy and distributed infrastructure. We’re joining to help that continue to grow. That can be anything from a very simple surety bond, interconnection bonds, or decommissioning bonds, and if you want to get nuanced in solar, all the way up to something pretty big like counterparty credit risk. For example— does the project have a bankable offtaker [buyer] for a solar or wind or fuel cell PPA [power purchase agreement]?

Really, the global energy transition is built on counterparty credit, which means that it’s fundamentally limited into how broadly energy such as solar and wind can be distributed. That is one example of something we’d like to see change where we think insurance can play a role.

We were born out of a recognition that there are many manifold and nuanced risks that need to be dealt with in order to deploy clean energy infrastructure, and that there are a lot of leading MGAs in this sector that may have innovative products that struggle to get capacity or enough capacity to address the market need. Really, GreenieRE was born out of listening to some of those leading MGAs and understanding that, yeah, you can get capacity, but it’s not uncommon to hear an MGA talk about how it took them one year, 18–24 months to actually get capacity. And then, there’s often concentration limits.

So, those leading carriers that are backing some of these MGAs may just get to a point where they’ve got more exposure than they can handle or more than they can take on a per obligor basis. GreenieRE is there to help go earlier and bigger on capacity when there’s concentration limits, and sometimes go smaller when there are deals that don’t hit the minimum premiums that are necessary for really large carriers to get out of bed.

There are key differences between surety and insurance and warranty. What’s nice about being a reinsurer is that we have more flexibility in the types of products that we deploy. We are really thrilled to be partnering with UCS, which is a leader in the space. And we kept hearing this story about developers that are relatively small, thinly capitalized, running out of surety capacity.

And so, this is necessary. We need to build energy infrastructure in this country. We need to do it quickly. In order to do that responsibly, to protect the utilities, to protect the communities that are hosts of solar, for example, but also other energy assets, you need surety bonds. That was really an easy one for us to come in, address a recognized need, and work with a great industry partner to help alleviate some of those bottlenecks.

Yeah, this is a fun one. Our goal is not just to come in and be a me-too product. We really want to work with other leaders in the industry and push the envelope, expand new products, new underwriting methodologies, new partnerships. Vensurety is really analogous to venture debt. We’re thinking about those venture-backed companies that are building some sort of energy asset, and whether that’s a battery or a heat pump, they need to deliver that solution to their customers and will be asked for a letter of credit or a surety bond. In many cases, the surety provider then asks for collateral, maybe 40%, 50%, 60%, we’ve heard as high as 80% [of the bond]. You have a company that has had to go out and raise venture capital or venture debt just to fund an account that’s not used for anything other than collateral. There are those startups, if they went to a normal bank, the bank would say, “I’m sorry, we can’t lend to you, you’re too risky.” But 50 years ago there was a category of debt called venture debt, which is specifically lending to startups that have a little bit higher risk profile. The terms of venture debt are different than normal loans, but as a category [it] has performed reasonably well and we’re taking the same analogy to surety.

We think that there are good risks out there that are underserved and that there’s an opportunity to provide surety to this class of venture-backed startups without necessarily collateralizing at 80%. Surety as a category is mostly underwritten to a zero loss ratio and typically [charges] 1% to 3%. What if we work with those companies to reduce the collateral requirement and charge more like 6%, 7%, 8%. We recognize that these are higher-risk deals, but this structure would allow those companies to have some of their own money back. That’s going to increase the chances of success in this very important category of business.

Yes, absolutely. There’s a lot of latent innovation in the insurance industry, things that we’re exploring. What are the good ideas that are still on the shelf? One of the areas that we’re exploring is green rebuild endorsements.

Typically, in property coverage there’s a like-for-like requirement, which is you have to build it back the same way it was, you know, if the house burns down. We’re looking at [whether there is] an opportunity to build back better, to build back with more sustainable materials, better insulation, high-efficiency appliances, efficient heating systems. In fact, these green rebuild endorsements already exist. We’re trying to figure out [if there] is something we can do to help make them more prevalent, and there’s some really great thought leaders out there. Carolyn Kousky at Insurance for Good is somebody who’s writing a lot about this, among other areas. We’re looking for people like that who have good ideas that we can help promote within the insurance ecosystem.

We’re really grateful for the collaboration with CGC, and they come from a long history of setting up green banks or mission-driven financial institutions. Over the last three years in working within the insurance community and speaking with CGC and other impact finance organizations, we identified that there’s been revolving green loan funds, [but] there haven’t been revolving green insurance companies. GreenieRE is really the first clean energy-focused reinsurer. The point of that CGC investment is to stand up a substantial balance sheet, but ultimately to run a commercial insurance platform. We intend to run profitably and scalably. This is intended so that when we show up to regulators or ratings agencies or primary carriers, they can see that GreenieRE is very well capitalized, such that if we do experience a large loss, we’ve got more than enough surplus to cover that.

We think insurance can be a vehicle for impact. We are demonstrating that not just with the investment from CGC; but part of the Vensurety announcement was philanthropic investment from the Schmidt Family Foundation and the Walton Family Foundation via Builders Vision, and there will be more.

What we want to show is that insurance can be a really targeted way of addressing bottleneck risks holding back deployment of mission-aligned infrastructure. That can be highly impactful, highly scalable by working with other commercial insurers, using tried and true commercial practices, and very efficient in the sense that if we don’t pay out that money in claims, it’s automatically recycled and should grow with underwriting profit. We want to develop this category of impact insurance and work alongside others in the industry to grow important and impactful segments.