Previous Editions
  • The vital role of insurance in Pakistan’s energy sector

Pakistan’s energy sector stands as the backbone of its economy, powering industries, homes, and infrastructure development. However, this vital sector is fraught with various risks, ranging from natural disasters to geopolitical tensions. In such a volatile environment, insurance plays a crucial role in safeguarding investments, ensuring stability, and fostering growth.

Understanding the importance

Insurance serves as a protective shield for energy sector stakeholders, including investors, project developers, and government entities. It offers financial security against unforeseen events that could lead to substantial losses, thereby promoting confidence and encouraging investment in energy infrastructure projects.

Power generation plans by 2030

There are various hydropower projects being developed in Pakistan, including Bunji (7,100 MW), Diamer Basha (4,500 MW) in Gilgit-Baltistan, Thakot (4,866 MW), and Dasu (4,320 MW) in Khyber Pakhtunkhawa.

The government developed a policy under three objectives, including universal access to energy, doubling the share of renewable energy, and doubling the rate of energy efficiency and conservation. In this regard, the target has been set: 60% of Pakistan’s energy will be clean and renewable by 2030. It is noteworthy to mention here that Pakistan’s solar and wind power potential is over 40,000 megawatts. Also, 30% of vehicles will be electric by 2030.

The Sustainable Development Goals (SDG 7), which called for universal access to clean and sustainable energy, were indispensable for progress on all 17 SDGs as well as climate goals.

These projects are being developed from public funds and financing from different agencies. Moreover, various countries are planning to invest in Pakistan’s energy sector, mainly China and Kingdom of Saudi Arabia. In recent years, there two countries announced mega projects in energy sector.

China will construct the largest civil nuclear power plant to produce 1,200 megawatts of electricity daily to the national grid at estimated to cost at least $3.5 billion. The plant is known as Chashma-5 will be completed by 2030.

Kingdom of Saudi Arabia planned to install 500 megawatts renewable energy projects worth $4.5 billion in Balochistan and a $10 billion mega oil refinery in Gwadar.

Risk mitigation

The energy sector is exposed to an array of risks, including natural disasters, equipment failures, political instability, and regulatory changes. Insurance provides a mechanism to transfer these risks to insurers, who bear the financial burden in case of any adverse events.

By mitigating risks, insurance enables energy companies to focus on their core operations without the constant fear of potential disruptions.

Protection of assets

Energy infrastructure, such as power plants, transmission lines, and pipelines, represents significant capital investments. These assets are susceptible to damage from natural calamities, accidents, and acts of sabotage. Insurance policies tailored to the energy sector offer coverage for property damage, business interruption, and liability claims, ensuring the protection of valuable assets and minimising financial losses.

The case of Pakistan

In Pakistan, the importance of insurance in the energy sector cannot be overstated. The country faces numerous challenges, including frequent power outages, inadequate infrastructure, and geopolitical tensions. To address these challenges and attract investments in the energy sector, Pakistan must prioritise risk management and insurance solutions.

With the government’s ambitious plans to enhance energy infrastructure through initiatives like the China-Pakistan Economic Corridor (CPEC) and renewable energy projects, the role of insurance becomes even more critical. By providing comprehensive coverage for these ventures, insurers can mitigate risks, bolster investor confidence, and contribute to the sustainable development of Pakistan’s energy sector.

In conclusion, insurance serves as a linchpin in the energy sector, offering protection, stability, and resilience against various risks. In Pakistan, where energy security is paramount for economic growth and social development, the importance of insurance cannot be overlooked. By embracing insurance solutions tailored to the unique challenges of the energy sector, Pakistan can unlock its full potential, drive investment, and pave the way for a brighter, more sustainable future.

First-ever energy summit

Leading international and local experts in the energy, power, infrastructure, risk management, and insurance sectors attended the first-ever Energy Summit 2024, hosted by Fidelity Insurance Brokers/Lockton in Karachi on March 5. The summit aims to promote dialogue, knowledge sharing, and networking, addressing key challenges and opportunities in the energy and insurance sectors.

Distinguished experts addressed the event, including Ata Khatib, Chairman Lockton MENA; Dr. Jason Shirley, General Manager at ECP Energy and Chemical Professionals; Phil Pavey, Senior Underwriter at GCube Insurance Services; Pavel Chernoverkhskiy, Chief Underwriting Officer at Zurich Insurance Company; Khurram Ali Khan, CEO of Fidelity Insurance Brokers, along with other industry leaders representing Independent Power Producers (IPPs) within Pakistan, oil and gas regulators, and accomplished insurance experts.

With an attendance of 400 stakeholders, including 40 international delegates, senior professionals, industry influencers, legal experts, investment bankers, and government officials, the summit was a successful event for providing valuable insights and networking opportunities to stakeholders in the energy and insurance sectors.

Experts highlighted the critical importance of insurance for the sustainable development of multiple energy resources, including power, oil, and gas, aimed at promoting investment opportunities, innovations, and efficiencies within the sector in Pakistan.

Speaking at the Energy Summit, CEO Fidelity Insurance Brokers Khurram Ali Khan stated, “The Energy Summit represented a pivotal moment for Pakistan’s energy sector, providing a unique platform for stakeholders to come together, share expertise, and chart a course toward a more sustainable and resilient energy future. By fostering dialogue and collaboration, we aim to drive meaningful change and unlock the immense potential of Pakistan’s energy sector.”

The Energy Summit: Fostering Growth, Collaboration, and Resilience in Pakistan’s Energy Mix invited participation from industry professionals, policymakers, researchers, investors, and other stakeholders passionate about shaping the future of energy in Pakistan. The conference was managed by TerraBiz.

The writer is the Chief Operating Officer at Fidelity Insurance Brokers