How to insure solar or wind installations

By Scott Foyer, National Practice Leader, Travelers Inland Marine

The market for insuring businesses in the renewable energy industry is small and highly specialized. While hundreds of insurance carriers offer products to a variety of industries, only a handful of insurance companies have made a commitment to serving the renewable energy sector.

The reasons for this are twofold. First, despite recent growth, the renewable energy industry is still relatively small, which limits the business potential for insurers. Second, the insurance requirements are complex and there is limited expertise among insurers on sustainable energy installations.

As a result—and as anyone who has built a wind or solar installation can attest—obtaining insurance for the project can be challenging, but it is just as important as securing financing. Investors will not give the "green light" to a project until they know their investment is protected by insurance.

There are, however, strategies that companies can take to find effective insurance solutions that meet price requirements, coverage needs, and financing demands.

The solution is expertise

While solar and wind companies often look to a local insurance agent to insure their power-generating installations, not all agents have experience in the renewable energy industry.

It is critical to find insurance partners who understand the specific risks facing renewable energy installations and can provide advice on how to protect installations from those risks.

To ensure an agent is qualified, begin by asking them two simple questions: Does your agency have a dedicated practice or an industry focus on renewable energy? And what experience do you have insuring businesses in the renewable energy industry?

You will find that these qualified agents and brokers work with insurance carriers that offer the following products and services:

• Comprehensive coverage for installation and personnel
• Specialized claim handling
• Specialized risk management services

Collaboration is king: what to look for

To get the optimal insurance solution, business owners need to work with their agents and carriers to use their combined industry knowledge and expertise to maximize their advantage. This process begins when business owners complete a supplemental application providing the agent with critical technical information about the installation. Carriers will then determine whether the risk is acceptable and at what price.

Risk-specific characteristics considered include:

• Locations of the installation(s) and susceptibility to catastrophic perils such as flood, earthquake, and windstorm
• Installation specifics such as system components, age, ratings, capacity, configuration, substation specifics, and overhead transmission lines
• Maintenance programs, either self-performed or subcontracted
• Site security to protect the site from vandals or unauthorized visitors
• Manufacturer warranties
• Availability of spare parts
• Contractual agreements

Once carriers have provided quotes, business owners will want to work with their agents to assess the pros and cons of each quote. The following factors should be taken into account when evaluating insurance providers.

1. The financial strength of the insurance carrier.
Insurance requirements may require an insurance carrier to have an A.M. Best rating of at least A or A- to ensure that they have the capital to pay claims and meet their short-term and long-term obligations.

2. How well the policy covers unique renewable energy risks.
Scrutinize the policy language to avoid gaps in coverage and ensure that it covers essential items such as new generation technology replacement costs and transition coverage from construction to permanent operations; mechanical breakdown; and green debris removal.

For example, renewable energy technology changes rapidly. In the event of a loss, will property be replaced with up-to-date technology? Or, if some solar arrays are generating power while others are still under construction, can both be insured under one policy?

3. The carrier's renewable energy claims-handling capabilities.
A carrier should have claims professionals who have claims experience in the solar and wind energy sectors, as well as resources to handle complex workers compensation losses that may occur in the renewable energy industry. For operations that include construction of a renewable energy project, owners should consider a carrier that has a team of experts with knowledge about construction means and methods specific to wind farm development and solar installations.

Those who own construction equipment should look for a carrier that has a heavy-equipment division that can perform I-CAR and ASE-certified on-site appraisals for a wide range of equipment, including cranes.

4. Whether the carrier offers risk-mitigation services that address the needs of the renewable energy industry. During the policy year, owners can minimize their exposure to loss by taking advantage of carrier services such as crane training; on-site safety reviews; contractual risk-transfer analysis; fall prevention training; rescue and response training; and industrial hygiene sampling, to name a few.

Viewing insurance as an expense you can just buy down the road during the construction phase can come back to bite you as an uncovered claim. Energy producers should not assume insurance coverage for a renewable energy installation is similar to what is needed for any large construction project—that can result in costly gaps in coverage, as wind turbines or solar arrays often become operational during the construction phase.

First-time buyers of insurance for a renewable energy installation may find that the process is not as easy as they thought it would be; which is all the more reason to work with agents and carriers who are experts in the industry.

The insurance requirements of the renewable energy industry are sophisticated and complex, but by taking these factors into consideration, solar and wind companies can improve the likelihood that they will obtain policies with the coverages and services they need to help protect their business.