Japanese Insurer Starts Covering Loss of Profit due to Decreased Solar Power Sales

Sompo Japan Insurance Inc. started offering a new optional plan, as part of its fire insurance policy, to cover loss of profit due to a reduction in solar electricity sales on October 1, 2012.

The optional plan, designed for solar power operators, pays up to the amount predetermined in the contract for the loss of operating profit resulting from a fire or natural disaster. The premium is calculated based on the estimated sales from solar electricity in the applicant's business plan for the year to be covered.

Since solar power output varies according to weather conditions and changes in solar radiation, it is sometimes difficult to determine the standard revenue from electricity sales in normal operation. To resolve this issue, the company refers to a publicly available database created by the New Energy and Industrial Technology Development Organization (NEDO), which has accumulated hourly and monthly data on solar radiation at 837 points across the nation. Using the power output estimated based on these data as a benchmark, the insurer makes a more realistic calculation of the loss of profit due to decreased sales of solar electricity.

Related JFS article:
Japanese Insurance Company to Cover Operational Risks for Solar Power Plants