From soaring price volatility and shifting geopolitical tensions to the urgent need to decarbonise, companies across the energy sector are facing risks on multiple fronts. Energy trading contracts can stretch for years, while market shocks can happen overnight. 

This contradiction, alongside market instability, demands tools that provide resilience, with one solution increasingly coming into the spotlight: credit insurance.

In a conversation with Trade Finance Global’s (TFG) Deputy Editor, Mahika Ravi Shankar, Madeleine Whiteley, Senior Client Manager at Aon, explored how credit insurance is helping energy clients navigate volatility, adapt to the transition to renewables, and manage the uncertainties that define today’s market. 

According to Whiteley, credit insurance has now surpassed safeguarding. “Typically, credit insurance and insurance in general is seen as a risk mitigant, but more and more we’re seeing it as a tool for growth,” she said. 

A catalyst for growth

Credit insurance was once solely associated with protecting a company if a buyer failed to pay. Today, credit insurance can be a strategic asset that helps businesses expand.  

A 2020 bank survey, conducted by International Trade and Forfaiting Association (ITFA) and the International Association of Credit Portfolio Managers (IACPM), found that “$135 billion of credit insurance coverage facilitated $346 billion in loans to the real economy.”

In other words, for every $1 of credit insurance coverage, banks were able to provide around $2.5 in actual loans to companies. This reflects how credit insurance doesn’t just protect, but it actively powers growth. 

“With our clients, they are really able to get a competitive edge through using better payment terms and being able to support larger line sizes with the use of credit insurance. Business can be conducted on a broader scale,” Whiteley explained. 

Insurance also enables companies to pursue larger transactions. Energy trades often involve values which very few businesses can comfortably take on. By placing part of the risk on the insurers, firms can extend higher credit lines to their clients and expand the scale of their operations. This gives them the freedom to offer terms that their rivals may not, which puts them at an advantage. 

In addition, these tools support diversification. Shared risk allows companies to become more willing to branch into different geographies and position themselves for opportunities in emerging energy markets. 

However, amid ongoing market turbulence, the value of credit insurance lies also in the resilience it provides. This is felt especially in the energy sector, where price volatility has become a defining feature.

Geopolitics and market volatility

In 2022, following Russia’s invasion of Ukraine, European gas supplies were slashed as pipeline flows from Russia collapsed by more than 45%. The sudden shift sent wholesale gas prices to record highs across the European Union (EU) and the UK. 

The shock underscored just how suddenly and severely energy markets can turn. A structural feature of the sector, “market volatility is real and can come out of the blue,” said Whiteley. “Clients who had insurance at this time had this reassurance and could ride it out, knowing that at least a portion of their exposure was secured. Those that didn’t had a much hairier time.”

Energy trading is linked to geopolitics: who buys from whom and under what tariffs. The Russia–Ukraine crisis showed just how fast those dynamics can turn. As Whiteley pointed out, credit insurance is becoming a “go-to tool” in this environment, giving companies a way to safeguard deals where political decisions might suddenly upset energy suppliers. By passing part of that risk to insurers, firms have more comfort to continue trading even while they operate in areas of volatlity. 

Supporting the energy transition

Energy companies are also facing the increasingly urgent, long-term challenge of decarbonisation. Whiteley argued that credit insurance is “here to support the energy transition and work with energy clients to provide that contingency cover.” 

However, doing so requires innovation, as well as a dynamic understanding of what clients need, so that insurance products can evolve accordingly. One example Whiteley pointed to is data centres. With the rapid rise of artificial intelligence (AI) – an industry that consumes vast amounts of electricity – these facilities are driving unprecedented demand. 

A Goldman Sachs report predicts that global power demand from data centres will jump by up to 165% by 2030 (from 2023 levels), primarily driven by AI workloads. These projections signal a significant shift in the energy sector that not only complicates the path to decarbonisation, but also creates more financial risk for the energy transition. 

With such energy-intensive sectors like data centres, the sheer size of the contracts means that if something went wrong, the potential losses for the supplier would be enormous. “Credit insurers are well placed to provide the structural support required to help manage those exposures,” said Whiteley.

Underwriting renewables

Long-term contracts present another challenge. Renewable power purchase agreements (PPAs) often run for 10-20 years, but most credit insurance covers do not stretch that long. “Who’s got a crystal ball that can see 10,15, 20 years ahead?” Whiteley asked. 

Still, insurers are still extending their tenors, as part of their efforts to aid the timelines necessitated by renewable energy projects. 

Export Credit Agencies (ECAs)—government-backed institutions such as UK Export Finance—are also playing a bigger role in the energy transition. Their goal is to support domestic companies in overseas projects, often by providing insurance where the private market is limited. Within the renewables space, this can mean backing long-term projects like supporting solar developments in emerging markets. 

Whiteley noted that collaboration between ECAs and the private market could expand overall capacity, allowing more green projects to move forward. According to HSBC, ECAs have an important role in facilitating businesses’ journey towards net zero, and “ECA-backed renewables energy-related volumes jumped from around USD3 billion in H1 2022 to around USD24 billion in 2023.”

Managing the weather

As Outkast said: “You can plan a pretty picnic, but you can’t predict the weather.” Renewable energy is weather-dependent. If the weather doesn’t cooperate, the project can generate less electricity than expected, meaning less revenue for the project owner. 

There are now specialist products such as parametric weather insurance, but Whiteley added that credit insurance can also play a role. As she explained, as long as a payment obligation can be identified, for instance through termination clauses, credit insurance can be structured to cover a loss.

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Looking ahead, it is clear that credit insurance is no longer solely a protective measure. It is integral not just to business growth, but also for the urgent pressure to transition into renewable energy. 

The future of the market depends on insurers meeting exposure levels, adapting to new technologies, and supporting their clients long term. As Whiteley noted, insurance works best as a partnership: “It’s about sharing risk and being in the same boat, riding the same storms.” 

When clients treat insurance as more than a last-resort safety net, when they view it as trusted partnerships, the industry can do more than withstand disruption: it can chart a more sustainable future for energy.