Climate change is making severe weather more common worldwide, which greatly affects the electric grid. Insurance funding is crucial for adaptation efforts and infrastructure resilience, according to Swiss Re.
From 2012 to 2023, over one-third of US power outages were due to severe weather, with the frequency increasing every four years.
The International Energy Agency says that the share of renewable power must increase from 28% in 2021 to 49% by 2030, even in conservative scenarios. However, grid development is slowed by political delays, lack of investment, and component shortages.
Natural disasters make grid resilience even harder. Hurricane Ian left 2.6 mn Floridians without power in 2022, and Hurricane Ida caused outages for 1 mn people in Louisiana in 2021. Winter Storm Elliott delivered insured losses of $5.4 bn in U.S. & Canada.
Winter Storm Uri affected at least 5 mn people from Texas to North Dakota.
Extreme heat also damages power infrastructure, as seen in the 2021 Pacific Northwest heat dome, which melted power cables. In 2024, Storm Ingunn caused transmission lines to fail in Norway, and flash floods in Sydney submerged substations, disrupting power (see Insured Losses from Winter Storm Ciarán Forecast).
Global average surface temperatures have risen by 1.1 degrees Celsius since 1850. Climate models predict more frequent and intense heatwaves.
Infrastructure datasets should clearly indicate the degree of exposure 33, sensitivity 34, and vulnerability 35 of electric grid components. This can include supervisory control and data acquisition temperature monitoring for substations
Mitali Chatterjee, Insurance Research Manager at Swiss Re
Innovative adaptation strategies may include nature-based solutions like Duke Energy’s “living with water” project in North Carolina (see Top 10 Costliest Insured Events).
Changes to the polar vortex and jet stream lead to cold snaps, heatwaves, droughts, and heavy rainfall, affecting the electric grid’s efficiency and increasing the risk of transformer failures.
Swiss Re emphasizes the need to retrofit and redesign infrastructure for resilience. New substations can include flood protection or be built on higher ground (see Global Reinsurance Property Catastrophe Market Outlook). Risk transfer and mitigation through insurance products provide partial solutions.
Insurers can offer risk management expertise and tailored solutions to protect against weather-related disruptions.
Enhancing grid resilience against climate hazards requires data, design, innovation, and investment. Collaboration among energy companies, insurers, and governments is essential.
