Adapting to a changing risk landscape
From the COVID-19 pandemic to substantial inflation, to the current geopolitical tensions, and an increase in the frequency and severity of weather-related catastrophic events, the risk landscape is continually evolving. And interconnected risks are contributing to a higher level of unpredictability.
This changing risk environment underscores the urgent need for organizations to be agile, flexible, and responsive to sudden and unforeseen fluctuations. Aside from preemptive risk mitigation strategies, organizations are also seeking insurance solutions that provide them with effective coverage that responds when they need it most.
Because of the significant benefits they offer, mutual insurers have emerged as important players within the energy and power industry. Since they operate on a model that prioritizes the interests of their members over profit, they are often better positioned to provide tailored coverage and support that closely aligns with the specific needs of the energy sector. The collaborative environment created by mutuals’ member-centric approach can be considered fertile ground for the creation of insights and resources that can help organizations navigate the risk management complexities they face.
As mutuals continue evolving to better serve their members, there are a number of trends impacting the way they operate, including:
1. Increasingly frequent and severe natural catastrophes
Severe weather-related events — including tornados, wildfires, severe storms, and flooding — are becoming more frequent, partly as a result of climate change. According to the National Oceanic and Atmospheric Administration (NOAA), the 27 disasters costing more than US$1 billion each that impacted the US in 2024 resulted in US$182.7 billion in damages.
Natural catastrophes pose a major challenge to energy and power companies. Aside from significant property damage, these severe events can lead to substantial business interruption losses. Further, already stretched supply chains may experience delivery delays of necessary rebuilding, recovery, and operational supplies, potentially causing longer and more expensive outages.
Mutual insurers are uniquely positioned to assist companies in mitigating the risks associated with natural disasters since they are able to provide tailored coverages and flexible support. Embracing technology, such as AI, can help reduce some costs. Investment in predictive modeling can help mutuals better understand geographic-related risks and identify locations that may not be profitable for investment. It is also important for these entities to facilitate training and further education of younger colleagues to minimize the risk of knowledge gaps.
2. The need to build more resilient infrastructure and supply chains
The potential devastation caused by natural catastrophes is further complicated by today’s more difficult geopolitical and geoeconomic landscape. Against a backdrop of intensified risk, including considerably higher operational costs due to regional conflicts, trade and tariff uncertainties, and inflationary and recessionary pressures, energy companies should not afford to adopt a wait-and-see posture.
This risk landscape underscores the need for more resilient infrastructure and supply chains that can better withstand the impacts of and adapt to substantial disruptive events.
Technologies that support real-time supply chain visibility can provide critical insights. Marsh McLennan’s AI-powered Sentrisk, for example, can help organizations identify unknown vulnerabilities within their supply chains and simulate the potential impacts of tariffs, with the goal of allowing them to better anticipate and address threats before they escalate into major crises and take proactive action to improve resiliency.
Insurers can play a critical role in helping energy companies build back infrastructure and supply chains that may be better equipped to withstand the impact of major disruptions. Given mutuals’ member-service goal, they can help fund investments intended to improve resilience to catastrophic events. Further, mutuals can provide valuable insights and additional resources intended to help their members invest in resilient technologies and practices.
3. Navigating the continuing talent shortage
Withstanding the changing risk landscape faced by the energy and power industry requires top talent who can help identify evolving and emerging risks, understand their potential impact, and determine the most effective actions and solutions to minimize disruptions and losses. But globally, many energy companies are facing a shortage of skilled workers, especially highly specialized ones, with the energy sector experiencing intense competition for talent.
The industry’s talent shortage could also impact mutuals. Because these vehicles often rely on volunteer hours from their members to operate efficiently, the current situation might make it more challenging to maintain the necessary expertise.
As experienced professionals retire, the industry as a whole could face a knowledge gap that hinders its ability to innovate. Unless the invaluable institutional knowledge of long-tenured employees is well-documented, it could be lost when they leave the company or retire. This loss can also create significant challenges for younger, less experienced employees who may struggle to navigate the company’s history, culture, and processes. Additionally, the absence of seasoned mentors may lead to diminished opportunities for informal learning and development.
Mitigating these gaps may involve organizations investing in knowledge-transfer strategies, including mentorship programs, and thoroughly documenting processes. Fostering collaboration between experienced and younger employees can help the industry become better positioned to navigate the ongoing talent shortage.
Collaborative approach helps unlock value
The energy and power industry is facing a complex and multifaceted risk landscape. Because of their extensive knowledge, mutual insurers may be well-positioned and equipped to help the industry address these issues and allow energy companies to better weather incoming challenges.
As the industry evolves and adapts to changing demands, mutuals may want to retain their existing footprint and continue to position themselves as trusted partners for the energy and power industry. Marsh is actively collaborating with mutual insurers in an effort to help them lead the way in the energy sector. Our recently established Mutual Center of Excellence aims to facilitate engagement with mutuals and align efforts to support the industry.