According to the U.S. Energy Information Administration, renewable energy projects accounted for more than half of new generating capacity built during 2014. And insurers and brokers who specialize in renewable energy are noticing the impact on their books of business.

“We are seeing a double-digit increase in Builder's Risk submissions, which we expect to continue,” says Sharon Primerano, chief underwriting officer for The Hartford's Marine practice.

Likewise, growth in the number of utility-grade projects has led to a corresponding increase in insurable values.

“We are seeing larger and larger facilities, particularly in ground-mounted solar [projects] that have arrays of over 20,000 panels,” Primerano says. “That is going to drive the need for more individual risk capacity on solar risk.”

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Capacity is growing to meet the demand, both from new entrants as well as expansion and alliances among the existing market. In 2013, Aspen Insurance partnered with PER se, a managing general agency with access to a consortium of Lloyd's Syndicates for capacity, to create a U.S.-based division focused on the renewable energy sector.

“We've definitely seen the size of projects getting bigger and bigger,” says Charles Klehr, senior vice president of Aspen Insurance's energy and construction unit in New York. He points to Aspen recently insuring a solar project in the Mojave Desert worth $1.5 million. “We've seen two projects of that size come on line within the past year,” Klehr adds.

In addition to the growth in utility-scale projects, residential renewable energy installation has been strong in recent years, fueled by tax credits and net metering that allows homeowners to sell surplus power to public utilities.

“You'll continue to see more contractors getting into the renewable business, and a continued reduction in cost for the technology that is also getting more efficient. Those factors make installation of equipment more and more attractive for homeowners,” says Mark Fishbaugh, Aon's U.S. power practice leader.

Exposures, claims pictures develop

Although a renewable-energy construction company may appear similar to other contractors from an insurance standpoint, there are notable differences. For instance, installing roof-mounted solar panels on a home or business presents different risks than those faced by roofers or electricians.

“Because there is power generation involved and excess is typically sold back to a utility, contractors could be on the hook for property damage and bodily injury caused by power surge and similar loss related to faulty work,” Fishbaugh explains.

As technology and regulations change, brokers need to know how those changes impact their clients, he adds: “Having the ability to understand liability assumed through signed contractual agreements is crucial.”

It's important for agents to educate themselves on the specific types of risk faced by renewable energy contractors, Primerano says. Connecting with carriers and other resources can help producers bring more value to their clients. “At the end of the day, an agent needs to have a relationship with a client, so that decisions are based on more than just price.”

Large energy-generating facilities face risks from equipment-related claims, particularly in the wind-power sector. For example, the major source of losses with wind turbines are gearboxes, which account for 75% of reported losses. Across all renewable sectors, lightning, wind and other natural perils are the typical loss drivers.

Loss frequency has been increasing as equipment ages and manufacturers' warranties expire. “Customers have become accustomed to manufacturers fixing problems at no charge under warranties that ran for 10 years,” says Klehr. “It's a boiler-and-machinery-type exposure. Now, warranties are expiring and claims are coming to us.”

An offsetting factor to the claims-frequency concern, however, is that the cost of repairs has been decreasing. In the past, roughly 60% of replacement parts came from outside the U.S. Now, it's 90%. There are also more third-party vendors that can provide replacement parts, and more contractors who specialize in repair. “All of those factors are bringing the costs of repair down,” Klehr notes.

However, claim severity can still be a concern, particularly with bigger generating facilities. In August 2012, a battery fire at Hawaii's 30-megawatt Kahuku Wind Farm cost $30 million and closed the plant for more than a year.