There is no doubt that most (if not all) South Africans are completely fed up with the concept of load shedding. Most of us also just want a cheaper, greener energy source. If you are like most of us, then you have probably considered solar energy for your home and/or business.
It is not surprising then, that the solar panels you see mounted on rooftops or ground mounted ones in solar farms are becoming a more common feature of the South African landscape. Termed photovoltaic energy, this type of technology continues to improve over time. While you may have considered the cost of installation – I am sure the cost of insuring this tech has been an afterthought. But have you considered what would happen in the event of theft or damage to the panels or your battery or inverter? If this does occur (even during the transit, construction or operational phase), it could mean a huge chunk of additional expense, not only in cash but time as well. This is where insurance comes into play.
Types of losses associated with PV plants
It is very important to consider what could cause a loss to a PV plant before considering the type of cover that is needed. In our experience at Firedart, the major causes of losses we are seeing thus far are theft, vandalism, lightning, and fire. Other losses include collapse and structural defects. The most frequent cause of loss for solar equipment we are seeing is hail, wind and fire.
Cover required for PV plants
It goes without saying that adequate insurance cover is key to mitigating risk. In addition to ensuring cover for loss from perils identified earlier, commercial PV plant owners should ensure that they have coverage for theft of PV system components, for systems installed on leased property as well as erection insurance. Business operators should require PV system service providers (installers or engineers) to provide proof of adequate general liability and professional liability/errors-and-omissions insurance coverage. Rather than rely on contracts that set minimum levels of insurance, however, even small commercial insureds should work with a broker knowledgeable about the insured’s business and exposures, including their PV system, to ensure appropriate coverages at a fair price and to tap into any available expertise for better managing overall risk.
Cover for Business Interruption
This type of insurance covers the loss of business income or of incurring an extra expense in cases where businesses are unable to operate. If an enterprise relies on a PV system to supply its power and a mechanical or equipment breakdown occurs, this could put the system and the business out of operation for lengthy periods. Separate policies are available for PV system mechanical or equipment breakdown that can bridge this coverage gap. Many insurers also cover fire perils under this section.
Most buyers of insurance focus on the premium required and cover provided. However, there are other very important matters to consider: claims handling and risk management. Claims handling can be critical in recovering from a loss. Some insurance companies and underwriting agencies have expert claim handlers that specialise in PV insurance and can help make the process run smoothly.
An insurance company’s claims-paying ability is also as important as low premium rates. Some insurance companies might compete on premiums, but when claims do occur, they could be slow to respond or could even become combative. Other insurers might not offer the lowest premiums but might have strong reputations for being responsive when claims arise.
Specialty insurers with experience in PV plant exposures and claims often maintain specialised risk management knowledge that help insureds better manage exposures and reduce their potential for loss. This can help insured to prevent losses and/or costs when a loss occurs.
South Africa’s solar energy potential is amongst the highest in the world. As solar energy becomes more viable and cost effective, insuring these assets is important. As we gain more experience in this exciting area of PV technology, I expect the insurance offering to be more competitive, widespread and tailored. I also think brokers / agents will become more knowledgeable about not only the insurance offering but the varied tech that is on offer. Indeed, an exciting time to be in this space!
AUTHOR: Prisha Bhoola, Managing Director of Firedart Engineering Underwriting Managers (Pty) Ltd.