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The cost to install solar power has dropped by more than 40% over the last decade, driving this power source to account for nearly half of new electric generating capacity in 2023, the Solar Energy Industries Association said. First-party coverage will protect the insured against its own lost data or business revenue, while third-party coverage will protect the insured against outside claims resulting from negligence or inadequacies regarding the reliability and/or security of the insured's computer network or website; both types of coverage are advisable. Loss Control On-Site Inspection: * What are the age, construction, and condition of the company's bu ildi ng(s)? * What hazards are posed by any adjacent buildings? * What is the layout of the premises? * What safety devices does the insured have in place on its boilers? * Is there an alarm system to indicate when liquid levels are low? * Are boilers separated from production areas and placed in their own fire division? * Items To Investigate: * Is the insured more dependent on location or reputation for its business? * In the event of a loss, is the insured more likely to repair, rebuild, or relocate? * Does the insured store valuable information on a computer network that can be accessed through the internet? * Has an outside party been commissioned to periodically test its electronic security protocols, and/or confer with any outside experts to review its security policies whenever they are revised? - Anthony Bellano
Best's Underwriting Reports and Best's Loss Control Reports provide insights into the risks and lines of coverage solar panel manufacturers need to consider.
The concept may appear simple and practical: Using solar power instead of conventional forms of energy reduces the amount of carbon and other pollutants that are emitted into the environment. Reducing the amount of carbon in the atmosphere translates into less pollution and cleaner air and water, according to the U.S. Department of Energy.
But for those who manufacture the panels that convert sunshine into energy, the insurance needs are great. Most significantly, underwriters should be aware of the potential for property and equipment breakdown, according to a Best's Underwriting & Loss Control Resources report titled Solar Panel Manufacturing.
"Special exposures include a number of ignition sources, the daily use of highly sophisticated machines, and the extended length of time needed to replace production equipment," according to the report description.
The creation of the network of electrical components that convert sunlight into electricity, or "solar systems," is a highly complex, scientific process, but also an industry that is seeing a surge in the United States due to the inclusion of federal tax credits stipulated in the 2022 Inflation Reduction Act. The cost to install solar power has dropped by more than 40% over the last decade, driving this power source to account for nearly half of new electric generating capacity in 2023, the Solar Energy Industries Association said.
Recurrent Energy, a subsidiary of Canadian Solar Inc. and a global developer and owner of solar and energy storage assets, announced in a February press release that it has secured $160 million in financing for a project that will "significantly expand the amount of renewable energy capacity installed in Louisiana."
In October 2023, Indiana Gov. Eric Holcomb announced that Canadian Solar also will build an $800 million solar cell manufacturing plant in the southern part of the state that will create 1,200 jobs.
Best's Underwriting Reports has identified 12 lines of coverage for solar panel manufacturers: Automobile Liability; Automobile Physical Damage; General Liability: Premises and Operations; General Liability: Products - Completed Operations; Environmental Impairment Liability; Workers' Compensation; Crime; Property; Business Interruption; Inland Marine; Equipment Breakdown; and Cyber Insurance.
Best's Hazard Index ranks the risk of exposure for the lines of business as Low (1-3), Medium (4-6), High (7-9), and Very High (10).
Following are excerpts from the Lines of Coverage report that shows the highest index rankings:
Lines of Coverage
Property
Solar panel manufacturers (including those that produce solar cells) will have a serious property exposure. Ignition sources will include faulty wiring, malfunctioning electrical equipment, ovens used in producing silicon wafers and/or solar panels, and, possibly, smoking. The fire load will include finished and unfinished solar panels or solar cells, raw materials, production equipment, adhesives, packaging materials, laminates, Ethelyne Vinyl Acetate (EVA), laboratory equipment (if there is an on-site laboratory), flammable chemicals, polyester or fluoropolymer materials used in backsheets, as well as office furniture and equipment. Silicon and silica dust can cause an explosion (and can also sometimes spontaneously combust) under certain circumstances. Computers will be covered here.
Equipment Breakdown
Due to highly sophisticated production machinery, the Equipment Breakdown exposure for solar cell and panel manufacturers will be serious. This equipment will be very expensive to replace. Most companies have large power generators on site. Modern manufacturing plants will utilize an array of robotic machinery and laser cutting equipment. Many equipment manufacturers will make service representatives available who specialize in repairing and maintaining specific machinery. This equipment should be continually monitored by qualified employees (preferably those trained by the equipment manufacturer) during work shifts to ensure its proper operation. The underwriter should investigate the availability of new machinery, as well as the availability of replacement parts.
Business Interruption
Business Interruption exposure for solar cell and solar panel manufacturing will be substantial. Given that the insured will likely occupy custom-built or considerably modified buildings, they will choose to repair the premises rather than relocate in the event of a loss. Replacing production equipment or rebuilding the facility will take an extended period of time. A large loss can cripple production for a year or more and can result in millions of dollars of lost revenue.
Cyber Insurance
For solar cell and panel manufacturers, the Cyber Insurance Liability exposure will be substantial. Cyber Insurance covers a unique set of exposures in that both third- and first-party losses may occur. Exposures include both internal and external attempts to steal (e.g., through hacking) confidential client information. Computer viruses could corrupt or outright destroy data. Denial-of-service (DoS) attacks can shut down an insured's operation for great lengths of time if the company's network is inadequately protected. First-party coverage will protect the insured against its own lost data or business revenue, while third-party coverage will protect the insured against outside claims resulting from negligence or inadequacies regarding the reliability and/or security of the insured's computer network or website; both types of coverage are advisable.
Loss Control
On-Site Inspection:
* What are the age, construction, and condition of the company's bu ildi ng(s)?
* What hazards are posed by any adjacent buildings?
* What is the layout of the premises?
* What safety devices does the insured have in place on its boilers?
* Is there an alarm system to indicate when liquid levels are low?
* Are boilers separated from production areas and placed in their own fire division?
* Items To Investigate:
* Is the insured more dependent on location or reputation for its business?
* In the event of a loss, is the insured more likely to repair, rebuild, or relocate?
* Does the insured store valuable information on a computer network that can be accessed through the internet?
* Has an outside party been commissioned to periodically test its electronic security protocols, and/or confer with any outside experts to review its security policies whenever they are revised?
- Anthony Bellano
Copyright A.M. Best Company Apr 2024