Room for Growth in Smaller Green Energy Market

How are insurers viewing the solar and renewable energy markets? While large risks likely have no problem, smaller to middle risks may face difficulty.

“I certainly think there’s a gap in the smaller risk area,” said Loren Henry, vice president, Environmental & Energy Practice, Jencap Specialty Insurance Services. “I think with the resources of some of the larger domestic carriers … they have resources from an underwriting perspective to throw at these large wind farms, and large solar farms. They understand and have a good grasp of those type of exposures, but they’re not necessarily chasing middle market or small market business that may have a different exposure base, different plans and ideology, than some of these larger exposures do.”

While Henry sees the solar installation side of the market as presenting great opportunities for agents and brokers, there is a gap in the insurance market for renewable energy risks in the smaller to middle market range. However that may be changing. Recently, Henry said, a few newer MGAs have come into the marketplace that are focusing exclusively on renewable energy in various forms. One of those is Ethos Specialty.

Tayler Marshall, vice president of Clean Tech at Ethos Specialty, part of the Ascot Group, says there are a lot of unknowns in insuring renewable energy-focused firms or other “clean tech” companies when it comes to performance over time so larger, standard market carriers are not willing to play in this space.

“We definitely see an opportunity on the smaller side with the influx of funding coming from the federal government” to support green energy, Marshall said. “We see a lot of risks that are in the startup phase. They have no prior loss experience. They’re new ventures and might be in the R&D phase doing more innovative technologies and so the standard markets, where they may be willing to eventually get there, they’re just not there yet,” she said. “It’s either too low for their minimum premium or it’s a risk that they just can’t wrap their heads around. But we’re in a great place to really understand the technologies behind their products and services and to support them for all the work that they’re doing into the future.”

Marshall says Ethos Specialty will consider general liability or excess liability for commercially focused risks working on the product side, including owners or developers of battery energy storage systems or solar, and product liability coverage for manufacturers, importers and distributors of companies that are offering products that support clean energy and a more sustainable future.

“We’re really interested in the commercial industrial side but when it’s a manufacturing type of risk, we’re interested in products that are used in residential applications,” she explained. That can be anything from a manufacturer of sensors to be used in solar applications to an EV charging station to smaller scale wind and hydroelectric facilities.

“We define clean tech as any product, technology or service that’s supporting a more sustainable future,” she said.

New interest in commercial solar projects is coming from traditional environmental markets, particularly on the solar side, as well, Henry said.

Canaan Crouch, managing director at Jencap Specialty, says interest in residential solar has declined from environmental carriers that entered the market six or seven years ago chasing residential solar business. “They were agnostic to whether it was residential or commercial and then the claims came in,” Crouch said. “What you saw was a break down on what the actual risk is — a residential solar installer, or a roofer.”

The market was “probably underpriced a little bit” and those carriers “learned a very swift and firm lesson,” he said. “So now we’re seeing somewhat of a softening of interest and a retreat where now carriers are trending more towards commercial risks that are not as heavy in residential install.”

There used to be a relatively robust marketplace — seven to eight carriers — but that has dwindled, he said.

“Now there’s roughly three carriers that are actively seeking that business. There’s other carriers that will dabble. For example, if the account is large enough, if the premium is seven figures plus, they’ll consider it but right now you see carriers being very picky and choosy.”

Crouch added that there are other issues to consider. “What nobody is really contemplating is the sourcing of those materials and some of the human tragedy that goes into sourcing, for example, cobalt or cadmium or lithium,” he said. “There’s terrible repercussions, not just sourcing that material, but also disposing of that material.”

Take solar, for example. “All of these panels have a usable life, and they’re eventually going to be garbage,” he said. “At this point, we don’t have the capabilities to effectively and efficiently recycle solar panels. The only thing that we’re able to really, truly capture as a resource from the recycling is some of the metals that go around and border these panels, but to get the material that is kind of baked into the glass, which is where many of the toxic chemicals are, we don’t have the commercial recycling capabilities to extract that.”