Cross-strait risks cannot be ignored, insurer warns offshore wind farm firms chasing lucrative Taiwan projects

Heightened geopolitical tensions in the Taiwan Strait, the narrow sea channel between Taiwan and mainland China that has become an offshore wind farms investment hotspot, has raised concerns on the adequacy of insurance coverage for the sector, according to an insurer focused on renewable energy. 

International developers – mainly European – have flocked to grab a share of lucrative wind farm development rights recently awarded on projects mainly in the seas west and northwest of the island, lured by excellent wind resources and high guaranteed long-term power prices.

“The prevailing attitude is one where they are almost discounting the likelihood of that risk because they are treating the Taiwan Strait as if it is the North Sea or the Baltic Sea,” said Jatin Sharma, the president of California-based GCube Insurance Services, which focuses on insuring renewable energy projects, in an interview with the South China Morning Post.

“The current political climate would dictate they should be exploring financial ways to protect their investments.” 

At stake is the security of wind farms worth at least US$22 billion that are expected to be built in the next five to seven years, which face war and asset expropriation risk, he said. 

While acts of the military are typically excluded from standard offshore wind insurance policies, in some cases where wind farm developers have bought policies to cover “specified risks” such as acts of war, they have later decided to “buy back” such coverage from their insurers, on the belief the geopolitical risk was relatively benign, Sharma noted.