Solar insurance market conditions are mirroring those of the solar industry as a whole. As prices for the panels drop, so do insurance market rates. Dropping rates and deductibles are expected to lead to decreased premium volume.
Still, the need for solar insurance increases as manufacturer consolidation continues. With growing opportunity, more insurance companies are entering the solar space with hopes of penetrating the market through aggressively-priced coverage and terms.
Warranty management programs are critical to developers with worries about the stability of original equipment manufacturers and, hence, securing financing for their projects. Jeanne Schwartz, vice president of new venture commercialization at Assurant, says demand to protect long-term cash flow is causing a trend toward multi-year warranty management.
“Project developers, lenders and investors want to lock in that security now and for the future,” Schwartz says. “This provides financial security that they can bank on.”
Innovative solar project financing models such as equipment leasing, third-party ownership, crowdfunding and community-owned projects have also created risks specific for the solar industry that are not covered well by traditional insurance. Charles A. Leone, CPCU, senior vice president for HUB International Insurance Services, says perceived risk of product and project underperformance can pose barriers when such external financing is used — but insurance can help.
“Energy performance insurance can provide protection from under-performance or project output,” Leone says. “The insurance provides the safety net in the event of any product or system failure.”
The focus on solar-project quality and bankability affects all parties involved in solar project development. Erin Cullen, a client executive at GCube Insurance Services, hopes this will lead to improved overall project quality and performance. In addition to the Solar Energy Industries Association (SEIA) and the Solar Electric Power Association (SEPA), other organizations are emerging and setting standards. North American Board of Certified Energy Practitioners (NABCEP), for example, focuses specifically on project development and installation.
“Operations and maintenance providers are striving to provide broader performance guarantees, which set them apart from the industry standard,” Cullen says. “All of this attention to detail is more than likely to increase the solar industry’s overall reputation and viability.”
Another space for which some solar insurers are beginning to provide coverage, Cullen adds, is battery storage. Many utility-scale projects are adding battery energy storage at the project site to ensure a consistent flow of energy into the grid.
“With the growing trend of batteries on site, insurance companies are challenged to ensure that the batteries are appropriately installed and monitored,” Cullen says. “It poses an electrical-fire risk that can cause huge detriment to both the project’s physical components and revenue stream.”
Cullen says because this is a newer aspect of most solar installations, her company requires a detailed description of the battery technology and fire protection being used to appropriately cover the battery exposure.
System performance monitoring systems, once a cost-prohibitive and rare purchase, are also becoming standard in most utility-scale projects. These sophisticated measurement tools are increasingly important to the testing and evaluation of solar projects and their components.
Schwartz says she anticipates that these technology-driven tools will become even more important to the insurance industry going forward. SPW
To read our introduction to the 2013 trends, click here.