PV Insurance Market Analysis and Future Prospects

On July 27th, both China and EU reached a price commitment on the export of China's PV products to the EU, which indicates that the EU's dispute over China's anti-dumping investigation on the PV industry will find a win-win road. In this crisis, the financial service system of China's photovoltaic industry has become one of the focuses of attention. Among them, the use and development of insurance tools that play an important role in supporting photovoltaic exports are worthy of discussion.

PV Insurance Product Analysis

The development of global PV insurance can basically be divided into three stages. The period of 2008-2010 is the first stage. The market is mainly based on one-year insurance policies of domestic insurance companies. During this period, domestic PV module manufacturers use a one-year policy as a 25-year policy to meet overseas buyers. Because the demand for products at that time was in short supply, buyers did not care. “The shortcomings of this insurance are very obvious. Once the company goes bankrupt, the insurance is immediately terminated - for domestic and foreign buyers, their rights and interests are not guaranteed at all. Because once the insured person is bankrupt or financially difficult, the premium payment cannot be continued and the policy will no longer be maintained. Subsisting.

2010-2012 is the second phase. Munichre (reinsurance) and PowerGuard have developed their own 25-year component power insurance products and have been insured by Chinese component manufacturers such as LDK, Chint Solar and Yingli. Research shows that there are harsh terms in the policies of the two insurance companies. This is a forced choice for domestic manufacturers to expand overseas markets and meet the needs of overseas customers because they have no choice but to pick up orders.

In the third stage, the long-term insurance for PV modules will be a genuine era of PV insurance underwritten by Chinese insurance agencies. The above two foreign insurances do not solve the real problem of compensation. Domestic insurance companies can improve their products on the basis of reference to foreign products, so that long-term insurance for photovoltaic components is no longer a paper leaflet, but it is a guarantee and Both policyholders and insurance companies are relatively fair and reasonable policies.

From the perspective of brand awareness, Munichre has the highest reputation in the world, and PowerGuard products are well-known in North America. However, there are still many limitations in the terms of insurance policy design and underwriting conditions.

The limitations of overseas insurance policies are mainly in the following areas:

1, policy supervision and legal risks

From the point of view of the insurance industry, according to the "China Insurance Law" and the relevant provisions of the China Insurance Regulatory Commission, all insurance business that takes place in mainland China should be insured by insurance companies approved by the China Insurance Regulatory Commission. If a foreign-funded insurance company needs to run insurance business in mainland China, it must also obtain the approval of the China Insurance Regulatory Commission and establish a branch in the country to operate its business. However, overseas insurance policies now have regulatory deficiencies. For example, the current individual companies in the photovoltaic industry who purchase POWERGUARD policies and insure insurance at Hanover International have the following two legal defects: First, POWERGUARD does not have an operating license for insurance brokers on the mainland, that is, it is on the mainland. The act of selling overseas insurance policies in the region itself is illegal. Second, Hanover International, the insurance company that undertakes the risk, has not applied to China's insurance regulatory authorities to establish branches to run insurance business. Therefore, the insurance company undertakes product quality insurance policies for Chinese PV companies. It is also inconsistent with China's relevant laws and regulations.

These two defects may cause the following passive results for the insured companies: First, if there is a dispute between the insured and the insurer, the insured PV company may not obtain legal support in mainland China; If future rights holders defend their rights to China's PV manufacturing companies under the policy, when Chinese PV companies make claims to insurance companies, the judicial costs of overseas rights protection, lawyer defense costs, and judicial delays that may be caused by unfamiliarity with the local legal system will all result in Become a major concern for insurance companies.

2, the insurance threshold is too high

The high threshold for Munichre policies, high rates and other requirements are great challenges for corporate funds. In addition, it is difficult to pay, because it set a deductible (refer to the loss within a certain limit, the insurer does not bear the amount of liability), high deductible means that only the manufacturer can have a major accident to be compensated, but the general amount If the loss is not up to the deductible standard, the policy is equal to a piece of paper. In general, Mu's deductible amount is between 2% and 8% of the insured amount. For first-line companies with sales of 1 billion US dollars, a single accident deductible is at least 20 million U.S. dollars, and it is clear that the possibility of obtaining compensation is very small.

3. Terms are too strong and unfavorable to policyholders and stakeholders

Some foreign policies are too strong for policyholders, obviously not in line with international practice. Take PowerGuard as an example, the Hanover International policy terms stipulate that the insured cannot take any legal action against the insurer! According to Article 54(2) of the "Contract Law" of China, if the contract is "unfair at the time of the conclusion of the contract, one of the parties shall have the right to request the people's court or arbitration institution to change or withdraw it." However, if the policyholder accepts the PowerGuard policy, it must give up the right to sue. If an insurance dispute occurs in the future, the insured and the right holders (buyers, banks, etc.) cannot defend their rights. There are many more such contracts in the PowerGuard policy.

4. Open and transparent policies

There are many unfavorable terms in the PowerGuard policy against component manufacturers, overseas buyers, and parties (entitlements). However, by signing a confidentiality agreement (NDA) with policyholders, it enforces policy terms and information.** Foreign disclosure of policy contents. Rights holders cannot understand the contents and underwriting conditions of the policy, so that the interests cannot be protected.

Financial Strength Analysis:

The main insurance organization used by PowerGuard products - Hanover International's 2012 annual report shows that the company's 2012 after-tax profit was only 8.7 million pounds, net assets of only 120 million pounds. Such a small-scale property insurance institution apparently does not possess the qualifications of long-term insurance for components that cover Chinese component companies. Although the company is part of the Hanover Group, the UK-based company is legally an independent legal entity and the Hanover Group does not assume unlimited liability.

Currently, PowerGuard only insures more than 15 component manufacturers each year in the Chinese market. The cumulative compensation limit is more than US$40 million per year. At this rate, only Hanover International's cumulative compensation limit will exceed its net assets within three years. If a number of companies have mass accidents, the insurance company may not be able to pay.

Regrettably, many banks do not realize the seriousness of the problem. They do not know enough about the contradiction between the underwriting insurance institutions' strength and the quality problems and high payouts in the rapid development of the photovoltaic industry. In addition to component manufacturers, banks and other institutions will be the biggest losers.

Summary:

Foreign insurance institutions provide a lot of references for China's insurance institutions in covering 25 years of insurance for PV modules of China's component companies, which will have a certain role in promoting the development of long-term insurance in the PV industry. At present, foreign insurance policies still have many limitations. China's photovoltaic industry is looking forward to better domestic and foreign products, especially the products of domestic insurance companies to protect the photovoltaic industry.