Renewable energy: Project managers asked to seek insurance cover

Benefits of insurance include wrap-around protection, control of placement and maintenance of insurance, avoiding gaps and duplication. CREATIVE COMMONS

KARACHI: 

Speakers at a seminar on Thursday urged managers of renewable energy projects to involve insurance professionals at an early stage of the due diligence process in order to avoid unforeseen losses at a later phase.

Taking part in the one-day seminar on “Renewable Energy: Risk Management and Insurance Solutions” organised by the Karachi Insurance Institute, the speakers highlighted key challenges associated with managing risks in the field of renewable energy.

“The role of insurers is paramount in the development of renewable energy. Insurers can provide project lenders with a seamless cradle-to-grave, principal/owner-controlled insurance programme,” said Mohammed Asif Arif, who serves as commissioner of insurance at the Securities and Exchange Commission of Pakistan (SECP), while addressing the audience.

He said such programmes include construction insurance, marine insurance, including delay in start-up/advanced loss of profits and third-party risk.

“Many project lenders are reluctant to sponsor projects, which are unlikely to have cradle-to-grave cover,” he observed.

Some of the tangible benefits of the principal/owner-controlled insurance programmes are wrap-around protection for the benefit of all interested parties, control of placement and maintenance of insurance, protection across all phases of the project, avoiding gaps and duplication in cover and minimisation of administrative workloads, according to the SECP’s insurance commissioner.

Moreover, Arif noted, avoiding delays caused by claims dispute, overall claims control, centralised risk management, elimination of insurance cost duplication and insurance coverage on loan agreement also constitute the principal/owner-controlled insurance programmes.

“International reinsurers such as Munich Re and Swiss Re are actively involved and supporting renewable energy projects by offering innovative insurance and risk transfer solutions, thus facilitating the investment, development and propagation of renewable energy sources,” Arif said.

Delivering a joint presentation on underwriting and engineering assessment of wind farms and solar plants, insurance professionals Alessandro Cerase and Mark N Quinn asked project managers to get those underwriters on board who are able to spread the risk and have some relevant past experience.

Listing the risks involved in underwriting renewable energy projects, they said political, catastrophic, technological, operational, regulatory, financial and product-related risks must be taken into consideration.

“If the underwriter doesn’t understand the risk, then he should not insure it,” Quinn said.