An expert has revealed an interesting coverage angle that is picking up steam in the renewable energy market.
Speaking to Insurance Business, Deborah Allan, client manager in the energy practice at Gallagher, said that more clients are raising questions around performance warranty insurance (PWI) as the coverage makes its way from manufacturers of renewable energy equipment to financiers, project investors and owners.
PWI is a specialised solution originally designed for manufacturers to protect themselves against warranty claims should solar modules or wind turbines prove to be defective or fail to meet performance expectations. Now, Allan says that the backers of renewable projects are increasingly looking for contingency covers of their own.
“Very few markets provide this type of cover, but PWI is becoming available to investors affording them additional financial security against manufacturer insolvency or, where the PWI limit has been eroded, meaning there is no policy for the investor to claim against,” Allan said.
“As an example, solar system manufacturers offer a ‘tiered’ or progressively reduced performance guarantee over a 20-25-year period. Where degradation in generation output is found to be excessive, resulting in financial losses to the asset owner, a warranty claim is made against the manufacturer.
“In a scenario where a manufacturer has become insolvent or bankrupt throughout this period, PWI allows a claim to be made directly with the insurer.”
With investment in renewable energy hitting a new high in 2017, according to annual figures from Bloomberg New Energy Finance, more financial players from different backgrounds are entering the market in consortiums, which Allan said is helping to drive the coverage uptake.
Related stories:
