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Risk Management Tools 2.2
Agricultural insurance, weather index insurance, clean technology
insurance, and catastrophe insurance are mature hedging instruments
that the international insurance industry has developed for climate
financing. Risk management services for sectors related to low carbon
economy investments could effectively reduce risks of low carbon
investments to attract more private funds, generate the substitution
effect, and bring extra funds for local governments to support the
development of low carbon economy. For example, as clean energy
technologies have not been tested by the market, there is the need to
seek channels for risk transfer. Current practices in the field of clean
technology insurance include a series of insurance products that
Munich Reinsurance Group has launched for clean energy technologies
(Box 2.11). Local governments can cooperate with insurance companies
to jointly provide risk guarantees or insurance services for low carbon
projects or investment.
Box 2.11: Clean Energy Technology Insurance Solutions by
Munich Reinsurance
Clean energy technology insurance solutions by Munich Reinsurance involve a variety
of products that may affect clean energy projects, such as solar module performance
insurance, possible loss insurances for wind and power plants, performance insurance
for products (such as lithium ion batteries, concentrated solar power generation, LED,
heat-protecting glass, etc.), insurance for hydropower plants, etc. These insurance
products can free clean technology equipment manufacturers and developers from
measurable and predictable losses resulting from product performance or objective
conditions. For example, Munich Reinsurance can provide insurance to manufacturers
who have insured PV module products and photovoltaic power plants with a production
capacity of more than 20 MW. Such an insurance product ensures that investors
can maintain a stable cash flow in the event that products operation runs worse than
expectations. When providing manufacturers with product performance insurance,
Munich Reinsurance has set requirements on a number of indicators, including
technical performance, manufacturing process stability, and monitoring and auditing
procedures for the manufacturing process. In September 2011, Ping An Insurance
and Munich Reinsurance signed a cooperation agreement to jointly provide insurance
solutions for the renewable energy industry in China.
In 2011, Munich Reinsurance once provided a performance guarantee solution for PV
modules of Eco Supplies Solar AB, a Sweden PV manufacturing supplier. When its PV
modules could not achieve the expected output power, a 25-year compensation payment
was provided; at the same time, the agreement also guaranteed that solar modules
should reach 90 per cent of output power in the first 10 years and 80 per cent of the
output power in the rest of the 15 years. In December 2012, Yingli Green Energy signed
Chapter 2 Innovative Financing for Low Carbon Development 121
Agricultural insurance, weather index insurance, clean technology
insurance, and catastrophe insurance are mature hedging instruments
that the international insurance industry has developed for climate
financing. Risk management services for sectors related to low carbon
economy investments could effectively reduce risks of low carbon
investments to attract more private funds, generate the substitution
effect, and bring extra funds for local governments to support the
development of low carbon economy. For example, as clean energy
technologies have not been tested by the market, there is the need to
seek channels for risk transfer. Current practices in the field of clean
technology insurance include a series of insurance products that
Munich Reinsurance Group has launched for clean energy technologies
(Box 2.11). Local governments can cooperate with insurance companies
to jointly provide risk guarantees or insurance services for low carbon
projects or investment.
Box 2.11: Clean Energy Technology Insurance Solutions by
Munich Reinsurance
Clean energy technology insurance solutions by Munich Reinsurance involve a variety
of products that may affect clean energy projects, such as solar module performance
insurance, possible loss insurances for wind and power plants, performance insurance
for products (such as lithium ion batteries, concentrated solar power generation, LED,
heat-protecting glass, etc.), insurance for hydropower plants, etc. These insurance
products can free clean technology equipment manufacturers and developers from
measurable and predictable losses resulting from product performance or objective
conditions. For example, Munich Reinsurance can provide insurance to manufacturers
who have insured PV module products and photovoltaic power plants with a production
capacity of more than 20 MW. Such an insurance product ensures that investors
can maintain a stable cash flow in the event that products operation runs worse than
expectations. When providing manufacturers with product performance insurance,
Munich Reinsurance has set requirements on a number of indicators, including
technical performance, manufacturing process stability, and monitoring and auditing
procedures for the manufacturing process. In September 2011, Ping An Insurance
and Munich Reinsurance signed a cooperation agreement to jointly provide insurance
solutions for the renewable energy industry in China.
In 2011, Munich Reinsurance once provided a performance guarantee solution for PV
modules of Eco Supplies Solar AB, a Sweden PV manufacturing supplier. When its PV
modules could not achieve the expected output power, a 25-year compensation payment
was provided; at the same time, the agreement also guaranteed that solar modules
should reach 90 per cent of output power in the first 10 years and 80 per cent of the
output power in the rest of the 15 years. In December 2012, Yingli Green Energy signed
Chapter 2 Innovative Financing for Low Carbon Development 121
