In Short : To help offset losses from unpredictable weather, solar and wind plants are placing their bets on a new insurance product.
In an attempt to safeguard their assets from the precise kind of climate risk that they were founded to combat, solar and wind energy businesses are placing their bets on a new kind of insurance.
If there is no wind, clouds block the sun, or a cyclone hits costly infrastructure, renewable energy plants may lose a lot of money. Many owners are using parametric insurance, a policy that offers quick compensation when specific weather-related parameters are satisfied, to guard against such climate-induced losses. The drawback is that there is no payoff if the predetermined trigger is missed by even a small amount. Furthermore, it’s possible that the money paid will only partially offset actual losses.
Nevertheless, parametric insurance is being used by more renewable energy enterprises to augment traditional indemnity programs. According to Marcel-Steffen Reif, global head of weather and AgRisk Partners at reinsurer Munich Re, “it’s definitely an area we see growing massively.”
