FM warns energy buildout risks are outrunning infrastructure

By Grace Kim

Eighty-five percent of respondents in FM’s global energy-risk survey said engineering insight at the early stages of a project could improve asset stability, insurability and investor confidence.

In the same survey, 46 percent of respondents said they were uncertain how new power technologies would perform under operational stress, particularly in hybrid applications.

FM surveyed 750 energy-sector risk decision-makers, 150 insurance brokers and 150 financiers worldwide. The commercial property insurer released its findings Friday, warning that emerging-technology risks are outpacing the expansion of global energy infrastructure.

What is driving the new infrastructure risk?

FM’s Power and Renewables Report examines battery energy storage, renewable energy, gas-fired generation and small modular reactors (SMRs). It highlights the limited operating histories of many emerging technologies at scale.

FM attributes the rapid expansion of power infrastructure to artificial intelligence, data centers, electrification and the energy transition.

• 59% of energy companies identified the adoption of new technologies as a leading cost-of-risk driver.
• 39% of energy companies plan to increase their SMR capacity over the next three years.

FM recommends incorporating engineering expertise at the start of projects, not only after construction or when insurance arrangements are being considered.

Doug Patterson, senior vice-president and division manager of specialty industries at FM, said energy companies face considerable pressure to expand capacity quickly, while early decisions can embed risks that become difficult and costly to address later.

Patterson said: “The biggest resilience decisions are often made when sites, technologies and equipment are selected. Engineering should be part of those decisions early, while there is still time to identify vulnerabilities and engineer out risk.”

FM’s survey shows companies planning capacity growth before newer technologies have long operating records.

How is uncertainty changing project economics?

FM found that uncertainty over infrastructure resilience affects project economics. Among energy providers surveyed:

• 51% said resilience uncertainty resulted in higher construction costs.
• 46% cited increased insurance costs.
• 40% reported lower returns on investment.
• 39% said uncertainty made projects less attractive to investors.

Financiers also estimated the cost of risk was higher than energy providers across several categories. FM said that comparison suggests companies funding infrastructure projects may have greater concerns about potential risks than the developers building them.

FM found financiers more concerned about project risk than energy providers.

Where do risks enter a project?

FM found that site selection was a major source of unexpected exposure. Seventy-eight percent of energy companies said location decisions frequently produced downstream exposures they had not anticipated at the time.

Calvin Kuan, FM’s regional head of Southeast Asia, said resilience considerations should enter infrastructure planning before construction begins, particularly as energy systems evolve and new technologies are introduced.

Kuan said: “In Singapore, every infrastructure decision carries weight. As energy systems evolve and technologies change, resilience can’t be something we assess only once an asset is built. The opportunity is to bring engineering into the conversation while there is still time to change the outcome.”

FM’s practical message is simple: review sites, technologies and equipment before construction makes changes expensive.

What role should insurers play?

FM says insurers can help developers identify and reduce risks before projects are completed, rather than focus solely on providing coverage once assets are operational.

Among insurance brokers surveyed:

• 71% valued insurer-provided engineering expertise for projects involving new or first-of-their-kind technologies.
• 67% cited construction projects as an area where the expertise was particularly valuable.
• 67% cited developments in catastrophe-prone regions.

FM said early engineering assessments could identify vulnerabilities in site selection, technology choices and project design, improving asset resilience while supporting insurability and investor confidence.

Overall, 85% of respondents agreed that engineering insight at the early stages of a project could improve asset stability, insurability and investor confidence.

FM positions insurers as engineering advisers before completion, not just coverage providers afterward.

As energy companies add SMR capacity over the next three years, FM’s survey puts early engineering at the center of keeping new assets insurable and attractive to investors.