Munich Re bets on renewable energy sector with new products

PUBLISHED : Thursday, 18 November, 2010, 12:00am
UPDATED : Thursday, 18 November, 2010, 12:00am

Munich Re, the world's largest reinsurer, has found a way to help combat man-made climate change by providing insurance products that reduce the risk for companies pursuing renewable energy projects.

Ludger Arnoldussen, board member for the Asia-Pacific region, said the reinsurer has launched a variety of insurance policies - including a performance guarantee - to help companies get such projects off the ground.

If a solar panel or wind turbine fails to perform properly a number of years down the track, for example, Munich Re would pay compensation. Before underwriting the risk, however, its experts would examine the technical specifications of the project.

Taiwanese and American companies have already taken up contracts.

'We have seen strong demand for this particular cover, especially from mainland China, due to the enormous investments in the renewable energy sector,' Arnoldussen said in an interview with the South China Morning Post.

The insurance coverage, he said, gave producers bargaining power to finance their projects and investors would be attracted by the security when investing in innovative 'green' technologies.

Teresa Au, Asia-Pacific regional head of corporate sustainability for HSBC, said the insurance cover would be important for the bank in deciding whether to offer lending to renewable energy makers.

'Of course our bank would feel more comfortable lending to these project developers if they have the insurance cover on their performance,' she said.

HSBC, the largest lender in Europe and Hong Kong, last year offered US$200 million in green project financing in the Asia-Pacific region to fund the building of renewable energy and other green technology projects, Au said.

The mainland has seen an increasing number of renewable energy projects since Beijing launched measures to encourage them.

The National Energy Administration proposed a five trillion yuan (HK$5.83 trillion) development package focusing on non-fossil fuel energy sources including nuclear, wind, solar and hydropower in the next two five-year plans to 2020.

A total of 500 GW of renewable power capacity is the target to be generated by 2020.

Chinese companies now rank among the top renewable energy manufacturers in the world. There are three Chinese wind turbine manufacturers among the world's top 10, including Sinovel, Goldwind and Dongfang.

A total of 10,129 wind turbines were installed on the mainland last year, with an energy capacity of 13.8GW - which meant an installation of more than one new turbine every hour, said Arnoldussen.

The nation's total wind capacity of 25.8 GW is now the world's second highest.

Since suppliers to the mainland's green energy makers were not only producing for domestic use but increasingly for export markets, the need for insurance coverage to attract buyers had increased, he said.

'Munich Re is a large investor in renewable energies. We plan to invest over Euro2.5 billion (HK$26.29 billion) in renewable energy projects worldwide over the mid term,' Arnoldussen said.

The biggest claims from natural catastrophes this year, he said, were those arising from earthquakes in Chile and New Zealand and storms in Europe, the US and Australia. The volcanic eruption in Indonesia and floods in Pakistan and on the mainland did not trigger many claims as these areas are underinsured.

Munich Re was the first foreign reinsurer to get a licence to operate on the mainland in 2003.

Reinsurers do not directly sell policies but work with direct insurance companies to share risk and assist with risk management and research.