The insurance industry is grappling with new challenges as solar power installations surge, attracting over $500 billion in investments in 2024, according to the International Energy Agency.
This rapid growth, particularly in solar photovoltaic (PV) systems, is raising concerns over fire and weather-related risks. Allianz Commercial notes that rooftop and floating installations pose significant hazards that insurers must carefully monitor.
Rooftop solar PV systems, increasingly prevalent in commercial and industrial buildings, are a primary focus due to their associated fire risks. The installation of PV modules introduces ignition sources and influences fire dynamics, complicating firefighting efforts during incidents. Recent high-profile fires involving buildings equipped with rooftop solar systems have highlighted these dangers. In the event of a fire, the consequences can be severe, leading to total building loss and substantial business interruption claims.
While ground-mounted solar farms are not subject to the same specific risks as rooftop systems, they still present their own insurance challenges. Nearby vegetation can facilitate the spread of fires, potentially damaging multiple solar modules and support structures. Additionally, wind damage poses a risk, especially if poor stormwater management undermines the structural integrity of the installations.
Floating PV farms, which are gaining popularity in areas with limited land, introduce further complexities for insurers. Severe storms can jeopardize the mooring systems of these floating structures, resulting in property damage and business interruptions. Moreover, fires on floating PV installations could pollute adjacent water bodies, increasing liability concerns for insurers.
As the global demand for electricity continues to rise, driven by technological advancements, decreasing costs, and supportive government policies, the solar sector is expected to account for half of this growth by 2025. However, the insurance industry must adapt to this evolving risk landscape, balancing the need for comprehensive coverage with effective loss prevention strategies.
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