Corey Lewis, a managing director at Aon, discusses the significance of tax insurance in the renewable energy sector and how the industry is adjusting to the Inflation Reduction Act. They explore tax insurance in M&A transactions, balancing corporate risks, and the future of tax equity investments in renewables.
Tax insurance is pivotal in renewable energy M&A deals, providing clean exits and balance sheet risk mitigation.
Inflation Reduction Act boosts tax insurance market by enhancing transferability and necessitating creative risk management strategies.
Deep dives
Role of Tax Insurance in Renewable Energy Sector
Tax insurance plays a crucial role in the renewable energy sector by ensuring known tax issues or risks in various contexts. It is used in M&A transactions to provide a cleaner exit for sellers and mitigate balance sheet risk for corporations. Moreover, tax insurance is extensively utilized in the tax credit space of renewable energy investments, covering a wide range of technologies and aiding in deal facilitation among different parties in financing transactions.
Impact of Inflation Reduction Act on Tax Insurance Market
The Inflation Reduction Act has significantly impacted the tax insurance market by increasing opportunities and limits in tax credit insurance. The Act introduced transferability, allowing investors to transfer tax credits, leading to new structures and complexities in deals. There has been a rise in creative approaches to utilizing tax insurance to provide certainty in uncertain areas post-Inflation Reduction Act, resulting in positive reactions from tax insurance markets.
Evolution of Tax Insurance Strategies
Tax insurance strategies are evolving post-Inflation Reduction Act, with a shift towards ensuring structural tax risks in unique transfer structures. The market is witnessing an uptick in requests to ensure risks related to the fair market value of projects, especially in transferability arrangements. Tax insurance is increasingly being customized to ensure specific adders like energy community or domestic content adders, offering economic benefits and risk mitigation in renewable energy investments.
Corey Lewis, a managing director at Aon, joins host Andrew Vitelli to talk about how tax insurance is used in the renewable energy sector and how the industry is adjusting to the Inflation Reduction Act.