Property & Casualty

Solar Farm Insurance

By Rob Freeman Jr.,
LEED AP

Insurance Producer, Energy & Climate Technology Practice
Risk Solutions

What Does Solar Farm Insurance Cost?

Solar farm insurance costs vary by coverage type and the specifics of your project. Below are generalized solar farm insurance cost estimates for property and commercial general liability (CGL) coverages. If you are building a solar farm in the U.S. and have business insurance questions, please contact Brown & Brown to discuss the options available to fit your unique needs.

Solar Farm Property Insurance

Solar farm property insurance helps protect solar photovoltaic systems against perils that may cause property damage or loss of business income. Hail, wind, fire, flood and earthquake are just a few perils that solar farm insurance buyers should consider.

Property and Business Income

Solar farm property insurance helps protect your investment, minimize downtime, ensure continuity and provide critical financial assistance in the event of property damage and/or loss of income.

Covered solar property typically includes photovoltaic panels, racks, inverters, batteries for energy storage, equipment and more. Income is also typically covered, including any incentives, such as renewable energy certificates (RECs).

Each project should be scheduled on your portfolio as you build or acquire new solar farms, resulting in an additional incremental premium. Solar property insurance may be written on a special form called an “All Risk” form. All Risk property insurance means the insurance policy covers all perils except those expressly excluded in the form.

Additional perils may be added to cover risks such as theft, earthquake, flood, hail, wind, cyber threats and terrorism. Inland marine or floater property insurance can also be written for property and equipment held on-site, in transit or held for others.

Solar farm insurance cost for property insurance coverage will vary from project to project based on the following factors:

Project size and value (replacement cost/actual cash value)
Project location (e.g., if the project is in a high-hazard wind zone or hail zone, such as on the coast, etc., the property rate will be higher than in a less hazardous zone)
Risk management program and best practices
Use of PV trackers and stowing systems
Use of advanced warning sensors to detect bad weather
Market conditions (e.g., if it is a “hard market” vs. a soft market)
Capacity (insurers may have limited capacity based on the number of projects underwritten that year)
Competition (are insurers interested in competing for solar farm insurance risks, or are they leaving the market because of unprofitability)?
Policy exclusions (the greater the number of exclusions in your insurance policy, the less coverage you have, which can reduce the premium—the opposite is also true)
Deductible or self-insured retention

Some of the factors listed above are outside your company’s control, whereas others can be influenced by the steps taken to mitigate risk.

Solar Farm Property Insurance Cost Example

A solar farm property insurance estimate is generally estimated as 20-50 basis points (bps or bips) multiplied times the solar system’s value. For example, a solar farm with $9,000,000 in property value and $1,000,000 of business income (a total of $10,000,000).

If you received a quote for 32 basis points, this would translate to 0.0032 multiplied times $10 million in total value, resulting in a $32,000 annual premium for your property insurance annually.

32 basis points
$10,000,000 solar farm value
$32,000 annual premium

Your actual premium depends on many factors, including those listed above, but your particular cost can be lower or higher based on a number of other considerations.

Solar Farm General Liability Insurance

Solar farm commercial general liability (CGL) insurance helps protect your solar farm from third-party bodily injury and property damage claims. Solar farm CGL insurance costs are priced based on liability exposure.

The commercial general liability exposure basis may be quantified using one of a variety of measures, including, but not limited to:

Energy output (kilowatts)
Revenue (sales)
Payroll

Your exposure basis is multiplied by the rate the insurer uses to calculate the premium needed to stay profitable in return for assuming the CGL risk for your project.

Solar Farm Insurance Commercial General Liability Example

Assume you have a 10-megawatt system, and the exposure used is kilowatts.

Using a hypothetical rate of 0.32 times the kilowatts of the 10-megawatt system (10,000 kilowatts x 0.32) equals a $3,200 annual premium per year.

Solar Farm Insurance Premium Calculation Factors

There are solar farm insurance cost underwriting factors that may be outside your company’s control and others that you can influence.

Factors You Can Influence:

Perils covered/purchased
Deductibles and self-insured retentions
Coverage limits of insurance (e.g., $1,000,000/$2,000,000 per occurrence/aggregate or greater limits for commercial general liability)
Location of project
Risk management practices (e.g., security of the site, monitoring, location, claims history, etc.)
Broker knowledge

Factors Outside of Your Control:

Minimum premiums (the minimum dollar amount the insurance carrier is willing to write a policy for)
Market capacity issues
Hard or soft market
General underwriting appetite

You can help control solar farm insurance costs by engaging in proven risk management efforts, carefully choosing the coverage limits you want, weighing coverage types and other factors that help reduce your risk.

Solar Farm Insurance Cost Summary

There are many types of solar farm insurance, including solar farm property insurance, commercial general liability, solar farm offtake insurance and solar production insurance. Depending on the type of insurance you choose, factors such as market conditions, your project’s location, risk management practices and coverage limits may affect the cost of your insurance.

Some of the cost factors may not be within your control, while you may be able to influence others. Your broker can help guide you in implementing proven risk management efforts while working with you to choose the coverage limits and coverage types that can help you manage your solar farm insurance costs.