Non traditional Insurance Solutions for Renewables Corporate Insurance Partner Special Enterprise Risks (SER) - Green Tech Solutions (GTS)J
Special Enterprise Risks (SER): Full support for your individual challenges SER offers innovative solutions for new risks that have hitherto been uninsurable SER develops tailor-made insurance cover for your individual risk mitigation needs SER targets industry clients with dynamic growth potential SER is part of Munich Reinsurance Company Insurance cover will generally be arranged with the involvement of a primary insurer in the Munich Re Group Munich Re - Green Tech Solutions February 15 2
Green Tech Solutions The SER team for Renewable Energy Range of solutions for the Renewable Energy Sector Solar Industry Wind Industry Further solutions Performance Warranty for Solar PV modules Performance Cover for Solar PV parks Performance Warranty for Concentrated Solar Power parks Performance Warranty for Wind turbines (Serial Loss Cover) Coverage for offshore logistic delays LED Performance Warranty Cover Performance Warranty for Lithium Ion Batteries Cooling Water for Power Plants Munich Re - Green Tech Solutions February 15 3
Enabling bankability (approach applies to wind/led etc.) Healthy Situation Performance Warranty Solar Farm +20MW project Manufacturer Non Recourse Financing Bank In case modules underperform threatening project s debt service or manufacturer s balance sheet, Munich RE steps in and provides liquidity to the manufacturer so it can easily keep its liability out of their warranties Performance Warranty Backstop Insurance LOC Bond 4
Project Cover risky situation Solar Farm +20MW project Non Recourse Financing Bank In case manufacturer goes out of business, its liabilities out of performance warranties towards clients will not be kept unless there is a legal successor. Munich RE s corporate cover stays only in force in case there is a legal successor. Assignability of corporate cover to end users is not feasible due to nature of insurance structure (eg. deductible) nor due to the nature of claim handling and legal requirements in various jurisdictions. Manufacturer Insurance LOC Bond 5
Project Cover Unhealthy situation Solar Farm +20MW project Non Recourse Financing Bank In case manufacturer goes out of business and modules start to underperform, no entity steps in for the warranty. Project cash flows will be reduced and the financing banks will experience partial or total default on debt service. For lenders this is a significant credit and recovery risk without having any rating attached nor direct recourse to 3 rd parties balance sheet. 1-2 years; >2-3% of PV only mega large scale and > 600bpp Manufacturer Insurance LOC Bond 6
Project Cover recovered situation Solar Farm +20MW project Bank (beneficiary of option cover) Insurance steps in and directly protects lender s debt service or investor s kwh output as a consequence of underperforming modules. This gives the financing banks separately allocated risk capital and direct access to insurer s balance sheet. No deductibles, black out periods etc. apply. Debt is 100% secured with AA rating. Manufacturer LOC Bond Insurance AA rated recourse financing for approx <1% of PV 7
Over-insured? Performance Warranty Solar Farm +20MW project Manufacturer Performance Warranty Backstop Bank Insurance Double/over -insured??? 8
Performance Warranty Insurance for Solar Projects Exclusive Agreement with Dedicated Capital Available from Munich Re Solar module (Manufacturer) Capacity MR Option Cover: 100% value of Project A modules (50 MW) MR Corporate Cover: Performance warranty Policy Project A: 50 MW 2015 Production: 100 MW Delivery of Modules Project B: 25 MW Project C: 5 MW Project D: 20 MW Individual risks and full module asset value can be covered at Munich Re-insured solar projects under separate, tailored policy agreement between the solar project (or its finance lender) and Munich Re Munich Re-CIP-SER-GTS August 2014 9
Solar Performance Warranty insurance benefits Feedback from the market: Business enabler and credit risk management Benefits for: Insuring Corporate Cover PV manufacturers Insurance = pro-active risk management Alignment of interests ensures long-term going concern Project Cover Customers of insured manufacturers Mitigates credit risk Strengthens manufacturer s creditworthiness, given long warranty period and uncertainty Marketing Risk Capital Management Bankability Customers prefer modules from insured manufacturers Differentiator in competitive market Munich Re seal of quality Balance sheet protection = cumulative loss reserve (1.0% - 2.5% of revenue) Insurance frees up capital as insurance can be counted as an asset (liquidity enhancement)* Munich Re is credible counterparty MR s underwriting valued as second opinion on technology risk Financial security Optimization of capex financing Attractive investment; enhanced risk profile Differentiates project in competitive market Optimizes financing terms Enhanced counterparty credit = favorable capital treatment by regulators / auditors Improved recovery scenarios for internal hedge and risk-weighting Technical endorsement Munich Re s underwriting and know-how are valued by investors Project default protection Insurance as business enabler credit risk management * final decision lies with the audit firm Munich Re - Green Tech Solutions February 15 10
Track record Executed : approx. 30 Corporate Policies globally since 2009 in PV approx. 20 Project Policies globally since 2012 in PV 4 Project Policies globally since 2011 in CSP 4 Corporate Policies globally since 2011 in Wind 2 Corporate Policies globally since 2012 in LED Audited: >100 solar PV manufacturers across all technologies > 20 solar CSP manufacturers/projects > 10 wind manufacturers a few LED manufacturers Munich Re - Green Tech Solutions February 15 11
The Move to Greener Buildings Rising energy prices Sustainability Targets Corporate Responsibility Efficient buildings are easier to sell or rent Energy Act 2011 Energy Service Companies Financing Energy Efficiency 2013 HSB Engineering Insurance Limited. All rights reserved. 12/02/2015 12
Energy Efficiency Insurance Policy The policy consists of 3 sections: 1. Material Damage physical damage including breakdown 2. Business Interruption loss of gross revenue following material damage 3. Asset Performance Insurance shortfall in energy savings realised compared to the level of savings insured Cover is available for periods of up to 5 years Terms are offered after an Energy Audit has been completed 2013 HSB Engineering Insurance Limited. All rights reserved. 12/02/2015 13
Benefits of Energy Efficiency Insurance The End User Reduced energy costs Reduced carbon footprint Confidence from insurance backed savings The ESCO Improved credit worthiness Improved availability and cost of loans Assets, revenue and performance protected The Lender Technical uncertainty removed Improved credit risk Loan repayments protected Customer confidence 2013 HSB Engineering Insurance Limited. All rights reserved. 12/02/2015 14
Taking EEI Forward UK launch Roll out to EU and beyond USA behind EU but catching up Discussions with ESCOs, funders and state initiatives Market leading 2013 HSB Engineering Insurance Limited. All rights reserved. 12/02/2015 15
HSB History Founding of The Company Polytechnic Club was formed by a group of engineers in 1857 after a major steam boiler explosion in Hartford Mississippi River Steamer Sultana s devastated explosion that killed a few thousand people in 1865 triggered the club members to form an engineering and insurance company with a simple goal of preventing boiler explosion and saving lives The Hartford Steam Boiler Inspection & Insurance Co was formally founded in 1866 in Hartford, CT. As declared by its original founder J.M. Allen, HSB is the first institution in America primarily dedicated to industrial safety. 16
Overview: HSB Group, Inc. Global Multiproduct High Touch Founded: USA Canada United Kingdom Global engineering Equipment Breakdown Engineered Lines Specialty P&C lines Full service Customized Touch end insured 1866 Heritage: Lead with technical expertise and follow with insurance Focus on prevention All Classes of Business Main street Institutional Public entity Industrial Residential Multidisciplinary Insurance Inspections Risk management Loss mitigation Engineering consulting Risk analysis 2014 HSB Engineering Insurance Limited. All rights reserved. 12/02/2015 17
Creating Value Through a Different Approach: All Risk Plus Specialty Offering What Why Add Specialty Insurance & Services Leveraging HSB Engineering Provides differentiation in an otherwise competitive market Equipment Breakdown, All Risk and Engineering Lines Leveraging HSB Engineering Core HSB product offerings and capabilities needed to participate in a meaningful way in the global market Strategy expands product offerings and broadens customer reach to cover full value chain
Disclaimer This presentation contains forward-looking statements that are based on current assumptions and forecasts of the management of Munich Re. Known and unknown risks, uncertainties and other factors could lead to material differences between the forward-looking statements given here and the actual development, in particular the results, financial situation and performance of our Company. The Company assumes no liability to update these forward-looking statements or to conform them to future events or developments. Munich Re - Green Tech Solutions February 15 19
CONTACT DETAILS Jan Napiorkowski Special Enterprise Risks APAC Corporate Insurance Partner, Munich Re Hong Kong jnapiorkowski@munichre.com Zhou Jie Head of Engineering The Hartford Steam Boiler Inspection and Insurance Co., Munich Re Shanghai Jie_Zhou@hsbct.com Munich Re - Green Tech Solutions February 15 20