In this episode, host Ben Perfitt speaks with Gus Majed, Founder and CEO of Paratus, and Adele Gale, Managing Director of Paratus Services Guernsey. The discussion explores the role of insurance in managing energy price volatility and supporting investment in renewable energy. Together, they examine how risk management solutions can help stabilise revenues, improve financing conditions and support the transition to a lower-carbon energy system.
Transcript below:
Ben Perfitt
Hello and welcome to the latest episode of the Sustainable Finance Guernsey podcast, rated one of the top 10 most useful sustainable finance podcasts by the Green Finance Guide. Guernsey is one of the jurisdictions leading the way in green and sustainable finance, and in this series, we speak to some of the leading global figures shaping the future of the sector. My name is Ben Perfitt, and I'll be hosting today's episode. I am a Senior Technical Associate at Guernsey Finance, the island's promotional agency for the financial services sector, and I lead our work in insurance and sustainable finance. Today, I'm delighted to be joined by Gus Majed and Adele Gale of Paratus Group.
Paratus is the world's first insurer and reinsurer underwriting energy price risk, providing innovative, commercially viable solutions that help accelerate the transition to net zero.
Gus Majed is the group CEO and founder of Paratus, which he established in 2020 and brought into full commercial operation in 2024 following investment from Ara Partners, a firm focused on industrial decarbonisation.
Adele Gale is Managing Director of Paratus Services Guernsey and Head of Operations for the Paratus Insurers. A chartered accountant with deep experience across Guernsey's insurance sector, she has held senior roles at Aon, Artex and Robus, now SRS, and served as Chief Risk Officer and Director for multiple firms. She also co-authored Guernsey's ESG framework for insurers and has led several industry firsts, including the island's first catastrophe bond and pension de-risk in captive.
Gus and Adele, welcome to the podcast. It's great to have you both here today. In today's episode, we'll be diving into the intersection of insurance innovation and the renewable energy transition. We'll explore the vision behind Paratus, why Guernsey was chosen as the home for their insurers and why now is a critical moment for innovation in this space. So firstly, over to you, Gus. Can you please explain to our audience why price volatility is so damaging for renewable investment?
Gus Majed
Yes, I think fundamentally what we have seen with the expanse of renewable power and renewable assets is a requirement for stability. So long-term stability was first and foremost in the design of long-term PPAs, ROC and FIT, essentially government-backed subsidies. And these did their job.
Fundamentally, the assets were viewed somewhat akin to property. They would say they were backed by these structures. And what that did was bring external capital against a fixed annuity. So, you saw in ultra-low-interest rate environments after the financial crisis, 50 bps to 100 bps, where a lot of these assets were generating returns of 10 to 15%. So, for a very long period, over a decade, you had stability that allowed incredible investment into the space. Now what's happened now, and part of it is also that there was long-term indexation to LNG, because obviously the price of gas and power are highly linked at the time.
What's happened is that these subsidies started to wear off the rocks and the fit subsidies wore off, a lot of these assets become more and more merchant. And one of the fundamental principles of financing assets is the stability of revenue and the recurring nature of revenue. So it becomes more complex to be able to volatile revenue, assets would become more merchant. And at the same time, the market itself started to decouple away from long-term gas contracts, LNG contracts, for example, some of the Qatari ones in the beginning were 15-year index. Now they're moving, they moved to spot. So now suddenly you've got a confluence of increased volatility in the power market, more merchant assets and suddenly you've got huge volatility. So, then the question is how do you contain it, how do you harness it and still enable the energy transition and that's really where Paratus steps in.
Ben Perfitt
Thank you, Gus. Thank you for the background. And that nicely follows on to our next question. How does price risk insurance address this volatility that you talk about and accelerate the renewable deployment? And what role can financial innovation, not just technology, play in climate progress?
Gus Majed
Yeah, think a major part of that is enabling a pragmatic energy transition. So what we do at Paratus we give both consumers and generators the ability to either protect their revenues, their budgeted revenues on the downside, so somewhat akin to an enhanced PPA, but also importantly, retain the upside.
So the issue with long-term PPAs is obviously you lock in for up to 10 years, but you give away every cold winter, you give away every political exogenous shock. We saw last summer the Israeli-Iranian conflict when power prices and gas prices spiked. And obviously this current winter, very, very strong power and gas prices. So what we do is we enable the generators to benefit from higher prices, but in a very orderly, lower-volatility manner using the insurance policy. But at the same time, for consumers, they're able to cap their cost base for the annual budget, say. But in the event there's, for whatever reason, there's a retracement in the power or gas price, they're able to physically buy lower-priced energy. So really, it's all about retaining the optionality and about making it financeable and monetizable.
Ben Perfitt
Thank you, Gus, and Adele, do you have any further thoughts?
Adele Gale
I mean, I suppose I would just say, you know, more generally, that we need a huge amount of investment per year. I think I saw an EY report suggesting that only 64 % of companies globally have a plan to transition to net zero, and 12 % have taken steps towards that. Just in recent years, 83 billion of GDP of sterling has contributed to...
Britain's GDP And so there is huge volatility and uncertainty in the economy within Britain, but also globally. And finding companies that can advance technologies like battery storage and other carbon capture technologies is fundamental, but also building the financial services infrastructure around that to support companies to take risks, be innovative, to develop the infrastructure in an environment where you have uncertain fiscal policy, uncertain government policy around sustainability and a weak infrastructure.
It's absolutely crucial, I think, that insurance, the funds industry, and all the sectors of the economy, of the financial services economy, can come together to support the global move to transition to net zero and de-risk it as much as possible for those entrepreneurial businesses.
Ben Perfitt
Thank you, Adele. So I guess the question is if price volatility is so damaging for renewable investment, why hasn't this cover existed before Paratus?
Gus Majed
Yeah, I think one thing I'd say is, I wouldn't say price volatility itself is damaging, is having the ability to harness it and understand it and risk mitigate it in a very ordered way. If you're able to do that, then that is incredibly powerful because a lot of these assets, and as I said, they're moving into merchant risk.
So when it comes to the financing, the LTVs and the debt service coverage ratio that the banks require are obviously affected. What Paratus tries to do is to step in and protect that merchant element and by definition, create more stable revenues going forward, which makes it more bankable and financeable. So really it's all about innovation. It's about using insurance and about using insurance capital to provide a kind of more balanced transition.
Ben Perfitt
And in terms of the early stages of development for Paratus, why, and perhaps Adele, you can lean on you here, why was Guernsey chosen as a domicile?
Adele Gale
So I suppose the first time I met Gus five years ago, I was working for an insurance manager in Guernsey and decided to join the company last year.
I think the thing that made Guernsey appealing for Paratus, and I don't want to put words in Gus's mouth, but was the expertise within the insurance management industry. So different to other domiciles, in Guernsey because we have a predictable regulator who uses a principles-based approach to regulation. We have an insurance management sector that really understands what's possible and is used to dealing and speaking to companies, understanding what they're trying to achieve, what their problems are, what their opportunities are, and building solutions around that. And then calling on the wide infrastructure of other professionals available on the island to support their initial analysis and thinking. So, calling in firms like Appleby, which supported the initial application structure for the application process for Paratus, calling in actuarial firms that can support IFRS 17 analysis, and calling on internal and external auditors. And we benefit here from having, obviously, all of the big four audit firms, but also a broad choice of slightly smaller firms, which offer bespoke services that really suit startup entrepreneurial businesses, having that mix that you can pick and choose advisory services and audit services from that broad offering.
And because of Guernsey's close-knit culture and also say a and of trying to build solutions in a way that protects IP and protects people's thought leadership, it kind of allows a sort of service that can be bought into, and that enabled Paratus to buy into Guernsey and what it could offer and ultimately choose to license their insurers here.
Ben Perfitt
Thank you, Adele, so many reasons there. From your perspective, Gus, what do you see as the core reasons why Guernsey was chosen as a domicile for Paratus?
Gus Majed
Yeah, I mean, we had several options, but really, Guernsey, every time I looked at it, came top. As Adele stated, the service sector, the level of professional expertise is first class. We met the regulator. We had excellent initial discussions. They understood what we were trying to do. The product had never been deployed globally, so there was a lot of innovation.
Guernsey were very on the forefront of innovation, renewables, technology. We're very much appreciated and trusted the solvency-like regime in terms of capital adequacy. And also practically from energy markets being operating in energy markets, it's a 24-7 hobby, so to the location is so important. If you've ever, you know, traded or dealt in the energy markets, you want to be geographically positioned roughly where London is. Because early morning, you've got the whole of the Asian market, our morning, suddenly it's UK, Europe, and then our afternoon, you have all of the US. So in terms of geography, it's fantastic. So literally every way we looked at it, ticked every single box and it absolutely has not disappointed.
Ben Perfitt
Fantastic. Thank you, Gus. So to jump back into Paratus and what you do, guess, to give some listeners more context about how your policies actually operate in practice. How do they both support renewable generators and energy consumers?
Gus Majed
Yeah, so unlike, let's say, a derivative or a parametric, which suddenly gets you into the world of contingency, non-contingency life insurance, we're a genuine contract of indemnity insurance. It's very important. And we went to a lot of trouble with Appleby's and barristerial advice. And what that does, is give you huge benefits in terms of accounting standards, in terms of how you report and what it really means, it's also simplicity. Everybody understands what an insurance policy does. It protects you from exogenous risks. For a power generator what is their risk? It's the event that the revenue, the power price or the gas price collapses. So we protect them against that.
But also, what we do is we give them by way of the insurance premium, the upside in the event the prices rises, they can crystallise higher revenues. Conversely, for consumers, it's literally the opposite. What are they worried about? An airline company, a shipping company, a consumer of gas, a consumer of power, they're worried about a really cold winter. They're worried about some political event overseas that results in higher prices. So essentially, we cap the price of power or gas for them, industrials, for example, manufacturing base, but in the event the prices retreat, they're able to buy lower-priced energy. So really, it's deploying an understandable product that everybody knows, insurance, in a highly regulated way. And I always say this in an aligned manner. I think that's fundamentally important. We work for the insured, we work for our clients.
We do not trade the other side, and a lot of us have traded our whole careers. So when you put that package together, you've got a really innovative product and also the team where we only do energy and that's what we've all ever done for 25, 30 years. So we know our market very well and there's kind of, you build a rapport and a relationship with your clients and trust that really is based on the insurance policy.
Ben Perfitt
Thank you. And we've started touching on this, but how is Paratus, would you say, reshaping risk then and competitiveness in the clean energy markets?
Gus Majed
So I'd say the way we do that is through very direct relationship building with our clients. It's an essentially, if you think about it, it's an end-to-end offering. You have former energy traders who have been in the markets 25-30 years. And one of the principles about understanding your risk is, what is the exposure? How much does an industrial consume? Is there shape to the consumption seasonality? Or to the generator, where are they generating? Is it in the UK? Is it in Europe? What parts of it? Understanding those market dynamics and then sharing that with the insured in a very transparent way and as I said, we do not trade against our clients. They see us as partners, and when you're able to share that in a very transparent manner, you create huge value gains.
Also, what it ultimately does, is create a competitive edge because they procure better, they generate better, they have essentially a team at their disposal who understands these markets. So really in the end, if we do our jobs, the IRRs should improve, the NAVs should improve, the dividend cover should improve, and the ability to buy your gas or power as a consumer should be more cost-effective. We can be benchmarked to that, so, the totality is efficiency and competitiveness.
Ben Perfitt
Yeah, and think this leads nicely into the next question, Gus, because my understanding is that a huge part of transition finance is convincing policymakers and businesses that it's not only essential for the environment, but also commercially viable. So can you, and in this mind, can you talk us through the low carbon transaction and why it matters as a proof point for the sector?
Gus Majed
Yeah, I think for us it was instrumental because suddenly it's about innovation, and to innovate you have to have a leap of faith and to a certain degree bravery after you've done your due diligence and you do the due diligence with your client. They look at the alternatives. We work with them over a period of six months, understanding what the assets are, what the generation capacity is, trying to understand their profiling. And then from that, we look at the alternatives, and we actually price the alternatives in terms of IRRs and returns. And also what does it mean if you have the policy in place? What does it allow you to do? And for them, one important part was obviously to provide the base returns but also they wanted to have the ability to benefit in the event that the market became more volatile and they were able to capture it, that they had, in the case of Marco Verspuij who's the head of revenue and optimisation, he has very deep expertise in the market. So it was really, I'd say a duality. The asset management team was satisfied with the returns and then the optimisation team were satisfied that it enabled them to have that very important alpha-generating element. So when you put that in totality and we deployed it, it worked fantastically. At the end of the year when the policy was completed, the market had retraced over the year. There was a claim, the claim was payable, I believe, within three to five days and importantly, all the metrics that low carbon were looking at versus the other products we overperformed. So it did what it was supposed to do. So for us, was a huge, not only a huge testament of the capability, but for the product and the partnership.
Ben Perfitt
Fantastic to hear Gus. Adele, shifting gears slightly. As a leader in sustainable finance, Guernsey has already pioneered developments such as the world's first regulated sustainable fund regimes. Do you see Guernsey emerging as a specialist centre for renewable energy solutions? And is this part of a wider pipeline of innovation that you see?
Adele Gale
I do, and I think that Guernsey has a long history of innovating, especially in my experience in the international insurance sector. We've built a long track record of world firsts, of bespoke transactions which haven't been replicated in other jurisdictions, or if they have, it's taken several years for that to happen.
And it is our kind of close ecosystem that I spoke about before that facilitates that. But of course, our regulator as well, as Gus mentioned, and I think it's incredibly pleasing to see the launch of the digital finance initiative by the GFSC in November last year and as part of that, the innovation sandbox and concierge service, which I know Guernsey Finance are also involved in. And I think that is something that I've seen for years, entrepreneurs looking at some of the problems that are being faced globally, thinking about insurance solutions and how those can be brought to market and choosing Guernsey because you can sit down with the GFSC and have a sensible conversation about how the regulatory regime may be applied to their business. And the GFSC, in my experience over the last 15 years, has been very good at giving businesses confidence and bringing decisions to them quickly around how the regulatory approach will be applied, you know, whereas in other regimes, you may have an initial meeting with a regulator. You may then have to submit quite a lot of documentation and then there'll be a process by which you kind of go through to ascertain exactly what your regulatory capital might be or how your governance structure might be viewed or, you know, a huge number of minutiae details.
In Guernsey, it's so much easier to kind of get collaborative working across the different sectors of financial crime, funds, insurance and because of that close interaction between businesses wanting to set up and choosing a domicile and the regulator, I think the regulator are incredibly switched on to the challenges that entrepreneurs have and seek to be a kind of welcome place. So I absolutely see Guernsey as continuing to support sustainable finance initiatives and being the domicile of choice for that type of entrepreneurial business set up.
Ben Perfitt
Thank you very much, Adele and it's clear Paratus has invested in the island and I've seen your graduate programme recently advertised here. What does it mean for Paratus building a base in Guernsey for your long-term strategy and this is to Adele or Gus?
Gus Majed
Yeah, well, it's fundamental. We're a Guernsey-regulated base, so it's very important to have a footprint there and also the ethos of the company. We, at a senior level, are led by very, very experienced energy market professionals. But I've always felt fundamental, you know, how I grew up in my career in the energy markets is you have to also build grassroots up. So you have to bring in the smartest talent, the most capable talent and teach them how to do it and to do it well. So we invest heavily in bringing bright young things, exposing them to the energy markets and it could be the renewable side, could be the traditional fuels, for example, in the aviation and maritime sectors or carbon emissions, for example.
As we expand, we need a growing presence and expertise in Guernsey, so this is what Adele looks after, running the Guernsey side of the business, and Stuart Tyler and our chief underwriting officers, as the team expands, so it is of fundamental importance for us.
Ben Perfitt
Thank you, Gus and Adele, you are on the ground as Gus said have you got anything you'd like to add in that space?
Adele Gale
I guess I just feel very lucky because I work for a company that's very supportive, that's active and wants us to be active in the local associations, supporting the development of the industry, supporting the growth and hiring a graduate.
Hopefully later on this year will be a fantastic step forward, but also investing into our footprint here, supporting local charities, all of those kind of good things that make you feel very proud of the place that you work and very happy to work there.
Ben Perfitt
Great, and I guess finally, in kind of looking into the future, where does Paratus go from here? What innovations do you expect to see in renewable energy markets in the insurance side going forward?
Gus Majed
I think the innovation is two-fold. I think there's demand pull and there's supply push. You can tinker away and try and create innovative new products and hopefully find a market. But what we're actually finding is the former, which is demand pull, where your clients are saying, I actually need this. This is my problem. Can you help solve it for us?
So actually, what we are evolving to is a solutions-based platform where we creatively try and solve and innovate through our understanding of the energy markets and working with our clients to develop a change. So for example, regulatory changes in terms of Corsia or ETS, European Carbon, how do we incorporate that into the insurance policy? How are we able to use the insurance policy with a lot of our clients on the generator side, how they're financing their latest acquisitions in wind farms or solar farms, for example. So really it's kind of, there's a duality to it. can innovate ourselves, but really what we're seeing, the real demand pull is coming from our clients asking for deeper understanding and explaining and then ultimately developing the product to risk transfer for their needs.
Ben Perfitt
Thanks Gus, a really interesting space to be working in. And I can't let you go about asking about Paratus in terms of the name and where that came from. Can you shed a little bit of light for our listeners?
Gus Majed
Yeah, so a couple of the chaps, we hire some ex-military, some of our colleagues, fantastic individuals. And one happens to be our chief commercial, chief operating officer, Nick Mys who was in the parachute regiment. And their motto is, or Utrinque paratus, which means ‘ready for anything’.
So, Paratus is fundamental about insurance. It's about being prepared, being ready for any risk, any tail risk, any exogenous volatility shock. So, we live in that spirit of being ready for anything.
Ben Perfitt
Fantastic. Thank you very much. Well, thank you for joining us today, Gus and Adele. I really appreciate your time on our podcast. Thank you to everyone for listening. If you enjoyed this discussion, we have an extensive back catalogue of interviews on the Guernsey Finance podcast channel. You can check them out by searching Guernsey Finance on your preferred podcast platform.
We also have links to Paratus in our show notes. To find out more about Guernsey and its specialist financial services sector, head over to our website, guernseyfinance.com. We look forward to welcoming you back to the podcast. Until then, it is goodbye from Guernsey.
