Scenario: a storm topples 5 turbines at a wind farm — tens of millions in damage. Fortunately, the sponsor had construction all-risk rolling into operational property cover — and the financing bank was first to recheck the insurance stack. Renewable project insurance is not “buy for show”.
The insurance tower of a power project
- CAR/EAR: construction/erection all-risk — mandatory during build, usually bought by the EPC contractor but controlled by the sponsor.
- Property: operational all-risk — turbines, panels, substations against natural catastrophe, fire, machinery breakdown.
- BI/DSU: business interruption / delay-in-startup — replacing lost revenue when the plant stops from insured events; the bank’s most valued piece, protecting debt-service cash flow.
- Liability: third-party liability, employer’s liability.
Financing banks’ requirements
Project lenders always impose a minimum insurance program in credit agreements: lines, limits, wordings, and assignment of proceeds to the bank (loss payee). Non-compliant insurance breaches covenants — risking acceleration.
Renewable-specific risks to mind when buying cover
- Natural catastrophe: typhoons, floods, lightning — Vietnam is typhoon-exposed; storm deductibles run high and need negotiation.
- Serial equipment defects: design/manufacturing flaws across turbine or inverter batches — cover must include latent defects.
- Delay in startup (DSU): insured construction incidents delaying COD — DSU covers ensuing fixed costs.
Managing the program over the project life
Power-project insurance is not buy-once: annual renewals, asset-value updates, risk-change notifications to insurers. On incidents, prompt notification and scene preservation per policy — late notice is the most common reason claims get partly denied.
Frequently asked questions
1. What insurance do wind/solar projects need?
CAR/EAR construction, operational property, BI/DSU business interruption, liability — a full tower over project life.
2. What do financing banks require on insurance?
A minimum program: lines, limits, wordings and proceeds assignment to the bank; non-compliance breaches covenants.
3. How important is business interruption (BI) cover?
Critical to banks — it protects debt-service cash flow when insured incidents stop the plant.
4. How is typhoon risk insured for wind farms?
Under property cover; Vietnam’s typhoon exposure means high storm deductibles — negotiate carefully.
5. What must be done to secure claims after incidents?
Prompt insurer notification and scene preservation per policy; late notice most commonly causes partial claim denial.
This article has been quality-reviewed by the FLAW AI Legal Council.