Solar photovoltaics (PV) is a vital technology in the transition away from fossil fuel energy. Globally, approximately 1 terawatt (TW) of solar PV capacity had been installed by 2022 and this is set to rise to 2 TW this year, according to Solar Power Europe, with the trade association predicting the rate of new installations could reach 1 TW a year by 2028.

But with solar panels needing to be in the wide open to generate electricity, they inevitably face the threat of damage from weather perils, notably hail and tornado, whose severity is worsening as the climate changes.

Many reinsurers and insurers are hesitant to offer coverage to the solar energy sector due to high losses, compounded by a lack of scientific understanding and historical data on risks like hail. If insurers withdraw from covering solar PV, it will impact the growth of this essential technology, so Paris-headquartered Descartes Underwriting set about developing a novel parametric solution to address critical coverage gaps.

Descartes has developed risk assessments based on AI models combined with radar data and on-the-ground observations. The firm says this approach enables a detailed and accurate evaluation of hail occurrences and severity, even in newly developed areas lacking precise historical hail data. This allows tailored parametric solutions with bespoke triggers, such as hailstone size.

The parametric solution has been adopted by several clients. For example, a Spanish renewable energy developer constructed a solar power plant in Texas, which is on track to produce 137 gigawatt hours of clean energy annually.

Having already secured power purchase agreements, the developer faced a critical challenge: its traditional insurance policy had insufficient coverage and unsustainably high deductibles for tornado and hail.

To plug the gap, Descartes calculated the probability of hail exceeding the maximum size the panels could withstand, to develop a policy that balances the developer's desired risk retention with their financial constraints. This approach ensured the parametric coverage effectively supplemented their existing insurance, bridging the deductible in the developer's traditional policy.