Swiss Re Corporate Solutions closes first solar radiation index deal in China

Swiss Re Corporate Solutions, together with Alltrust Property Insurance Co. Ltd, has closed the first solar radiation index transaction in China. The deal, completed on 11 Nov 2014, marks the first time that a Chinese solar power plant uses this type of solution to protect its power generation revenue.

Solar power is clean and environment friendly. However, the power generation of a solar power plant is subject to Mother Nature. The fluctuation of solar radiation impacts directly the power generation and thus the cash flow of solar plants, which might further endanger their capability to pay back their loans and achieve the desired return on investment. Solar radiation index insurance provides an effective solution to this exposure and thus addresses the concerns of investors and banks.

Many countries, including China, have been encouraging investments in solar power. China has set up an aggressive plan for the industry, i.e. to achieve 35 GW of installed capacity by 2015. Huge investment is needed to make this happen. By transferring the risk in power generation, solar radiation index solutions help solar plants to access investment and loans, and thus contribute to the development of the industry.

The solar power industry is just one of many exposed to weather. The hydropower and wind power sectors face similar situations. Many hydropower companies in China reported different levels of drought losses in the past ten years, and the wind industry, though still young, has also experienced wind shortage particularly in 2011 and 2014.

On the other hand, temperature drives the energy demand during the summer and winter. More and more energy companies in China have realized these exposures and have started using weather solutions to proactively manage them. For instance, Meiyan Hydropower Co. Ltd, a listed company in China, bought the first rainfall index solution in 2012. This solar radiation index transaction is just the start of a series of additional products that Swiss Re Corporate Solutions developing for energy players.

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