Japanese Insurance Company to Cover Operational Risks for Solar Power Plants

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Mitsui Sumitomo Insurance Co. of Japan announced that it started to sell on June 20, 2012, a Mega Solar Total Compensation Plan to provide large-scale solar power plant operators with reasonable compensation options for a variety of operational risks. The plan combines insurance with insurance derivatives.

After evaluating the potential risks a megawatt-scale solar operator faces, the plan provides the operator with a comprehensive package of fire insurance (for assets and profits), liability insurance, and weather derivative that would compensate for a reduction in income due to a shortage of sunshine hours. The plan can be customized to client needs. Clients may also be eligible for a discount on the insurance premium depending on the results of their risk evaluation.

As one example of an insurance plan for a solar power plant valued at one billion yen (about U.S.$12.66 million) with a rated power output of three megawatts, fire insurance would cost 2.2 million yen (about U.S.$27,800) per year, liability insurance for plant installation would cost 0.3 million yen (about U.S.$3,800), and a derivative for shortage of sunshine hours would cost 1.8 million yen (about U.S.$22,800), resulting in a total cost of approximately 4.3 million yen (about U.S.$54,400) per year.

Mitsui Sumitomo aims to achieve a sales target of 0.5 billion yen (about U.S.$6.3 million) for insurance and derivative products in the coming two years as numerous solar power plants come online in Japan.