PRODUCT: Battery Performance Warranty Cover

COMPANY: Munich Re

BEST RATING: A+ (Superior)

AVAILABILITY: Coverage is available on an open-brokerage basis.

FOCUS: Munich Re’s Green Tech Solutions unit has been developing and underwriting energy risk coverages for the last 10 years. In 2009, the company became the first insurer to cover solar module performance risks and contributed to the acceptance and bankability of solar technology.

Since then, Munich Re has introduced various covers for green technologies, each tailored to a specific industry demand, such as serial loss covers for wind turbines, output covers for bioenergy plants and yield covers for wind farms.

Now, the Battery Performance Warranty Cover product is one of the first coverages in the world to make battery performance insurable.

Most manufacturers offer long-term warranties of up to 10 years against product defects and performance degradation. But these warranties tie up capital and increase the risk of high costs through serial losses and excessive maintenance costs, resulting in an adverse effect on the manufacturer’s profit.

The Battery Performance Warranty Cover solution enables manufacturers to insure their customer warranties, protecting them against the risk of their products not delivering as promised.

The product addresses the manufacturer’s and project owner’s risk that a storage system requires more maintenance and higher maintenance costs than expected. For example, if the repair or replacement costs of defective or weak battery modules exceed a predetermined amount, the insurance then covers the rest.

“Tailored to the specific technology, the coverage compensates for excessive maintenance costs or component replacement due to technical underperformance,” explains Michael Schrempp, head of section, Green Tech Solutions, Munich Re. “The coverage helps transfer a still unproven and evolving technology risk, to a manageable exposure, hence supporting bankability and financing.”

COVERAGE DETAILS: Coverage remains in place even if the manufacturer is no longer active. Munich Re’s insurance capacity has been exclusively allocated to predefined projects and the backstop remains intact even after insolvency of the manufacturer.

UNDERWRITING: The process begins with signing a non-disclosure agreement to facilitate good faith in the transfer of important information, such as test reports and third-party engineering reports, concerning the specific energy source. After providing a non-binding indication, Munich Re will perform a site visit to discuss any open questions and finalize policy wording and pricing.

MINIMUM PREMIUM: Varies based on risk.

TARGET: Focus areas are currently North America, Asia and Europe. Company revenue must be above $20 million. All technologies and applications will be considered, but the product is primarily aimed at major projects, such as those to ensure grid stability or to cover peak demand periods. No coverage is available for “second-life batteries.”

COVERAGE TERRITORY: Worldwide.

CONTACT: Michael Schrempp, head of section, Green Tech Solutions; Munich Re, Munich, Germany.

Will Jones is IA assistant editor.