1. You need to meet guarantee obligations even if you suffer large serial losses.
Serial losses may occur when new technologies are phased into production. For example, the components of a wind turbine generator could entail hidden defects that often remain undiscovered until the components have been commissioned and begun operation.
In case of a systematic failure (serial loss), the bundle of defective components cannot be replaced immediately as the disassembly and reassembly takes time, and there is only a limited number of specialists with the required equipment available. The loss suffered by the operator, or by the manufacturer, during the guarantee period may constitute a financial burden.
To alleviate this burden, we can negotiate options with insurers to provide the wind industry with insurance protection against large technical losses, including:
Serial losses cover: providing financial certainty to wind turbine manufacturers (OEM) and to suppliers of high-value components like gearboxes, rotor blades and other tower components.
Preventive maintenance cover: protecting losses arising from serial loss events which have not yet resulted in any material damage, or component suppliers not fulfilling the guarantees on defective components.
2. Your offshore project is delayed due to adverse weather conditions.
Protect stakeholders against an overrun of the planned project schedule (including expedient weather buffers) and the resultant additional costs.
Based on weather risk assessments, together with insurers we can devise a suitable insurance structure using historical weather data. Among other things, this involves defining parameters such as weather-related trigger values for downtimes (loss event); project planning and time buffers (deductible); and specifying the rates for ship and crew (indemnification rate).
3. You want to be financially protected against wind turbine failures.
Independent service providers (ISP) could run the operation and maintenance (O&M) of wind farms, but usually avoid the responsibility and the associated costs for major component replacements. The repair or replacement of many major components, considered unscheduled maintenance, becomes a crucial part of the financial plan of a wind farm.
The Operation and Maintenance (O&M) cover, combined with an ISP contract, closes the gap between the full-service agreement provided by the wind turbine manufacturer (OEM) and the more basic service agreement from the ISP contractor. The Operation and Maintenance cover provides financial coverage in case of an unforeseen overrun of O&M expenses due to large technical problems in the wind farm.
Insurers can offer O&M cover of newly planned wind farms with a timeframe of up to ten years of operation. The coverage includes unforeseen and unscheduled maintenance costs, which substantially exceed best-estimated reserves in the wind farm business plan. Additionally, insurers can offer coverage against loss of revenue due to downtimes resulting from the replacement of insured major components.
4. You are an EPC contractor and need protection against large warranty claims.
EPC contractors, especially in offshore wind, play an important role in the overall project. The work packages could run into the billions of dollars including the supply and installation of the wind turbines, foundations or cables. While large warranty claims are rare, they can have serious implications for EPC contractors and suppliers. Conventional CAR and Operational Covers (OC) focus on physical damages in the construction and operational phases, but most times they fail to cover the complex and costly defect liabilities assumed by EPC contractors and component suppliers. Traditional insurance products usually do not cover the EPC contractor liabilities for the rectifications of warranty defects, and large serial failures.
Specialised EPC cover can protect EPC contractors and component suppliers against the impact of large warranty claims due to faulty construction (certified design), faulty material, faulty production or bad workmanship, for a period of up to five years.
For more information on innovative insurance solutions for onshore and offshore wind power read the following document prepared by Munich RE.
