Hi, welcome to today's webinar, Solar Photovoltaic Energy, Risks, Underwritings, Pitfalls, and Claims, hosted by Inland Marine Underwriters Association. I'm Lillian Colson, and I would like to thank our presenter, Frasier McLaughlin, for preparing this presentation, as well as Ben Tuttle with Tokyo Marine America for connecting IMUA with Frasier. Ben is a current IMUA board member, and he also serves on the Northeast Regional Advisory Committee and the Legislative and Regulatory Affairs Committee for IMUA. Additionally, thank you to my colleagues, Eileen and Ali Monreale, for working behind the scenes to coordinate this webinar with Frasier. We have 150 individuals registered to participate in the webinar today, and we look forward to learning together. Before we get started, we have a couple of quick items to review. To help reduce strain on your local network, we suggest you close all internet-reliant programs. You'll find your attendee control panel on your screen, and it will minimize by default. At any point, you can see an orange arrow icon. Right-click on that arrow, uncheck the auto-hide option to restore your control panel. This is where you'll find the handout tab, and that's where you can retrieve a PDF of the slide presentation of today's presentation. Due to our time schedule today, we're going to reserve questions for the end of the webinar, but at any time, please use the Q&A box, the Q&A tab that's also in your control panel, and type your questions, and Frasier will address your question at the end of the presentation, and we encourage you to ask lots of questions. But when doing so, please refrain from asking questions on matters affecting rates or conditions of insurance contracts as per IMUA's policy statement. We'll offer a $125 Amazon gift card at the end of today's session for the most engaged attendee with the best question, so please make sure you send in those questions. We'll also ask a trivia question, and the selected winner with the correct answer will receive a $25 Amazon gift card, too. Without further delay, I'd like to introduce today's presenter, Frasier McLaughlin. As G-Qube's Chief Executive, Frasier is responsible for driving strategy and business development together with overseeing the international development of the company. With over 30 years of experience in the insurance market, Frasier has held senior level positions at Aon, Miller, JLT, and Marsh. For most of his career, Frasier has specialized in the renewable energy industry, and in 2007, he founded G-Qube, the specialist provider of insurance services for utility-scale renewable energy projects around the globe. Frasier was one of the first to design insurance products geared specifically for the renewable energy industry across all classes of business. He was a pioneer in the development of offshore wind in the U.K., having arranged the insurance for the U.K.'s first offshore wind farm. He hosts and chairs numerous events specifically focused in the renewable energy space. Frasier enjoys food, cooking, and especially wine. He loves jazz. However, he claims he's a very bad tenor sax player, but at heart, he's a frustrated fighter pilot holding a PPLA, an IMCR, instrument rating, night rating, and a commercial pilot's license. Let's give a virtual round of applause to Frasier McLaughlin. Welcome. Thank you, Eva, so much, Lillian, and I'm pleased to be talking to you from my spare room, or I'll say displeased to be talking to you from my spare room again in London, in England, where it looks like we are getting a little bit more locked down with regards to COVID, yet again, just before Christmas. So, what I was going to do today, if I can, let's just do this, is just go through a very brief introduction to GQ and give you a general feel of where the market is going with regards to renewable energy. And then, specifically, what I'd like to do is delve down into really ensuring solar risks and, most importantly, some of the issues that we have seen at GQ over the last 10 years when it comes to ensuring solar risks, and talk about the claims and the gotchas and all that kind of stuff, because on the face of it, solar does really seem like a pretty benign type of risk, and candidly, when we set out in the industry, we were a wind energy provider and we thought solar was the next best thing, and we've been caught out a little bit on that, and I'm going to be very transparent in this presentation and we can talk about some of the issues that we've seen as a business as well. So, I look forward to engaging with all of you. I look forward to getting lots of good questions and lots of good dialogue. I may pick some up as we go through the presentation, but I think, as Lillian said, most of them will try and head off towards the end, and the best one, obviously, gets the voucher, so that's great. So, let's crack on. Just a little bit about our business. For those of you that don't really know it, we founded it, as Lillian said, in 1997. Originally, we grew out from our old parent in 2007 and effectively created a formal MGA. The last 18 months, maybe two years even, has been very interesting. We sold that MGA business to TMHCC, Tokyo Marine Houston Casualty, in June 1, 2020, and that was interesting in itself. Selling a business over Zoom and Teams is challenging, to say the least, but we did that, and where we are now, this is really the end of our first year of being a wholly owned subsidiary of TMHCC, and we're about a $140 million business. We have four main offices in London, New York, Newport Beach, California, and Amsterdam, and we employ just over 60 people, soon to be about 62 people. We are shortly, in the new year, be adding to those offices. We're about to open our Australian office for the first time, which is really good, because it's our first venture into the Southern Hemisphere in respect of renewables, and we are now a fully-fledged insurance company, so we underwrite on behalf of TMHCC, so the paper that we put out to the market is all TMHCC or HCC, depending on what part of the world or what jurisdiction we're actually trading in. As I said, all we actually do is renewable energy. Most of the renewables that we do is wind, and that's wind onshore and offshore, and then by far the biggest part of the book – or, sorry, I should say the most growing, most expanding part of the book is solar, and when I get on to my slides in a minute, you'll see exponentially how important solar actually is to the renewable energy industry. We do write a very small amount of hydro and wave tidal. We did write a little bit of biomass and things like that pretty unsuccessfully, if I'm honest, so most of our focus is on wind energy, on or offshore, or solar. We don't write any conventional power generation at all. There's a big enough market out there that do that, and we can't offer any specialization. We like to think we've been around the industry long enough that we're kind of leaders in the class, and we do know what we talk about. We hold a very large database on industry claims and what's going on in the industry over the last 20 years. It's a very, very claims-intensive business. We average on our book alone around about 400 claims a year, and our mission really is to set a sustainable level for renewable energy business. We came from a very privileged position back in the 90s and even really into the early 2000s of not having that much competition in the market, which was good for us and probably bad for our clients, and obviously now renewables is a place that everybody actually wants to be in, so we've moved from having very little competition to a lot of competition. Our view has always been that we're here to support the renewable energy industry, and we want to do that in a sustainable way. We can do that by not necessarily being the cheapest game in town, but offering what we view are competitive terms, paying claims promptly on time, and basically looking after our clients and our customers over the longer term. Many of our clients and customers have been with us for decades, or at least two decades now, so there's something we're doing right, I think. So just talking about the renewable energy market as a whole, and you can look at this little graph here, and you can see the yellow, how important solar is actually going to be to the renewable energy industry as a whole. We're really only just getting into the beginning of where solar is actually going to go as part of the overall energy mix, and you can see in this graph that you've got things like the conventional fossil fuels going downwards, the coal, the gas, and the oil, and things like that. I'm talking of coal, gas, and oil. My lights have just gone out at home, but there we are. So I shouldn't maybe say those words around my house. But you can look at the solar, and you can see that exponentially it is an absolutely massive part of the industry as we go forward. So it's hugely important, and it really is going to exceed, I would say, wind in the sort of medium to longer term. But it's an industry which doesn't come out without its challenges and without its issues, which we're going to get into. So I just thought I'd start today, or this afternoon, with a quick question. I'm just wondering if you can name for me the principal type of solar power that there is. Is it thermal, conventional, photovoltaic, or is it radiation? What are your answers to that poll? I think I'm going to give you about 20 to 30 seconds to make a decision. Okay. Good start. Excellent. Photovoltaic. Yeah. Absolutely. Hand over fist is the largest type of solar power that currently is out there. Not to say that the others are not good or anything like that, but by far the photovoltaic industry is the one that has grown most rapidly and the one that has seen the biggest decreases in prices. So we're very much off to a good start there. So moving on, before we get into sort of PV, as I'm going to call it from now on, I just wanted to touch on thermal because it is a pretty impressive technology. It's also a technology which I don't think should necessarily be completely discounted. But to me, it is very much like more of a conventional type of power generation. And thermal comes in two basic forms and there are other derivatives of this form, but the first form that you can see and probably the most widely used form is on the right hand side which is the concentrated solar power, the thermal stuff where you have a whole load of mirrors which are in a straight uniform array and there's a pipe that runs through those mirrors and that pipe contains a type of oil or it's pretty much close to a derivative of oil and it superheats that oil and that oil superheats water and it turns pretty much a conventional steam turbine that is kind of like a conventional power generation facility. So it's very common in obviously hot and arid climates where they can get up to super hot temperatures in deserts, in the Middle East, in Southern Europe and places like that. There's quite a few of these projects around, but it relies at the end of it one steam turbine which is producing a lot of the power or all of the power or sometimes two steam turbines which are producing a lot or all of the power and obviously as a result of that there's a big choke point with regards to business interruption and things like that if those turbine or turbine actually goes down. The other type of technology is probably even more interesting, the power towers where you have a cluster of mirrors with some very sophisticated software that beam the sun's rays into what's generally known as the power tower. That tends to be salt at the top of that tower which is heated up to around about 3,000 degrees Celsius, so extremely hot and that salt becomes molten and the same sort of principle applies that molten salt which is hot can run a steam turbine and therefore produce electricity. And again these projects whilst the technology is very interesting and we've looked at a lot of the technology especially in Spain and here in Europe, they don't come without their inherent problems. There are a few out in the Mojave Desert in the US which are quite famous as well and they've had their own degree of issues. So I would say on that type of technology it's certainly evolving. We wouldn't necessarily dismiss either of those two but most of that technology at the moment is written in what I would call the conventional power generation market but just touching on thermal for a second because again it's an industry which is also expanding. And then on to really what we are here to talk about today which is the photovoltaic or the PV and there are a number of different types of this. There are the sort of dual-axis trackers, there's fixed angle, there's a multi-arrays, there's single trackers. So different types, they bring with them their own issues, their own complexities and in some instances they are very, very simple. There is very, very easy technology. The common thing about all of these technologies is that you are dealing with photovoltaic cells and by their very nature photovoltaic cells degrade over time. So the power output that you get from day one is not the same power output that you're ever going to get at year 20 or year 10 even. So slowly as years go on the actual output from these PV cells does degrade and there are insurers out there who will offer warranties and guarantees with regards to the actual ability of these cells to perform. It's something that we don't do. They're interesting products and interesting ideas but just one thing to bear in mind with regards to PV technology is over a period of time it does actually degrade. So moving on to – now we've sort of covered the technology aspect of everything and we are moving on. Just sort of another question for you. Where do you all think the majority of solar claims actually arise from? Is it from mechanical breakdown? Is it a performance risk? Is it a warranty issue? Or is it more sort of traditional natural catastrophe? I'll just give you a few more seconds to think about your answers. Oh, we've got a good crowd. All right. Natural catastrophe, you're right. And yeah, to be honest, breakdown is pretty much number two. So if you pick that, either number four, number one, you're good. But there are issues as well with performance risk, and there are issues with warranties on PV especially. But by far, the majority of the claims actually arise from natural catastrophe. So that's the right answer. So let's talk about NatCap for a second. Here's the US in 2015 with regards to sort of weather and climate disasters and things like that. Quite a lot of events going on, lots of severe weather, wildfires really starting to hit the headlines, lots of flooding in the Carolinas and things like that. Some would say nothing new, but it was about this time in the insurance world, especially in renewables, that a lot of this NatCap stuff started to sort of hit the headlines and actually started to impact our own book with regards to claims and stuff like that. But if we fast forward that about five years, let's just have another look at it now. And that is how many NatCap events have actually increased over the US in those years. And it is really quite incredible to think what is happening in the US with regards to a lot of these events. And it's not only limited to the US, it's all over the world. And we can have arguments and bar arguments all day long about climate change and things like that. But our claims record absolutely dictates that globally, the weather is 100% changing. And there are way more natural disasters even today than there were five years ago. And I can guarantee you, if I was to replay that slide from 10 years ago, it would be worse. It would be worse now. In the US, it's a five-fold increase in the last 10 years with regards to NatCap. Is the insurance industry pricing itself for a five-fold increase? I would argue it's probably not, certainly right now. And then you've got this added conundrum of how are we all defining NatCap? Well, traditionally, NatCap has been defined as – oh, my lights are back on. NatCap has been defined as windstorm, flood, an earthquake. And people have kind of left it like that. But what about things like convective storms? And what about things like hail and tornado and stuff like that? Because 80% of the insurance claims that we actually see come from a natural event, an external event. And that's very interesting when you compare that to another technology like wind energy. Because if you compare it to wind energy, 80% of the claims that happen to wind energy come from an internal event. There are mechanical issues, there are breakdown issues, and things like that. So, it is an absolute correlation between the two industries. But for sure, solar suffers a lot more events which affect it externally than internally. And where do those majority of, let's call it, NatCap claims come from? Well, they come from that list in front of you. They come from hail, they come from tornadoes, they come from thunderstorms, heavy rain and lightning, and things like microbursts. And probably things that traditionally we don't think about or necessarily that we actually model for. Most of the things that we certainly model for are the more traditional perils like windstorm, earthquake, and flooding in flood zones. But we have solar projects that get flooded where they're not necessarily in traditional flood areas. Indeed, what they're doing is they're building solar projects right up to the very edge of necessarily a flood plain. So, as an underwriter, you've kind of got to use your common sense when you're underwriting this stuff and look at it and say, okay, well, I'm that close to a flood plain. I'm 100 yards away, 500 yards away. Is there an opportunity here to have some wind-driven water which is actually going to flood my site? How high off are these panels and the inverters and the control systems and the substations from the ground if that does actually happen? Collectively, we can group these little perils that you see here in the slide to a definition of convective storm. But then you get into the debate as to, well, what is a convective storm? Are there more perils that we can actually put in there or are there not? Indeed, are there some we could actually take away? But I would say by far, those are certainly the most events that we've seen that are affecting solar projects, and not only in the U.S., but frankly, around the world. And the impact of these can be absolutely huge. And here is a project – this project, if I get it right from memory, was in California. And I don't know if there's anything necessarily that you in the audience would recognize as abnormal about this particular project. Looks like a conventional solar array. It's built into various phases. It sits nicely in a sort of canyon there. You can see with the topography around it that they've built it into the space on the flat ground. And this is actually after a tornado went through this site. Now, fortunately or unfortunately, depending on the way you look at it, there was a hill walker actually up on the hills a fair distance from the project who took this picture. So, you can see the project down there on the left-hand side of the picture, and you can see the tornado actually hitting it. And remember that picture that I showed you at the beginning was the project actually after that tornado had gone through it. And some of you have probably noticed, because I can certainly recognize we've got a smart crowd because of the answers to questions, but some of you may have noticed that actually there was a hairline crack going through that particular project. And I've tried to highlight it there with you with some arrows so that you can actually see where it went and the track of that tornado through the particular project. So, doesn't really look like very much damage occurred to that particular project. And seeing it from the sky and seeing it from that, it actually looks okay. The truth of the matter is that there's your little hairline crack going through that project. It wiped out a good number of panels in a very, very short space. It was two or three minutes worth of time as tornadoes tend to do. What was strange, there was a few things which was actually strange about this particular loss. The first is really the location of it. It was California. Now, if you'd said to me, I don't know, five years ago, California tornadoes, I would have said, they don't happen in California. We know where tornadoes are. We know where they happen, or we roughly know where they happen. But no, what we're starting to see now is tornadoes happening all over the US in places where ordinarily we would never ever actually see them. And that was weird for us insofar as this was in the middle of California, never seen a proper destructive tornado there before. I'm sure there has been in the past, but we'd never seen one. And the actual damage was pretty substantial. The other thing that was interesting about this particular loss is that the actual damage was about $40 million. I'm using round numbers, but the actual damage was about $40 million. So it was a pretty substantial claim in itself. The issue was twofold. One, it was extremely hot out there. And therefore, when we actually went to site and when the loss adjusters went to site, one thing became abundantly clear. In California, a lot of this stuff was considered a pollution-type mess. There was environmental issues, and all of it piece by piece had to be A, properly picked up. It had to be properly bagged up. It had to be properly taken away. It had to be properly disposed of. And the crews who were working were only allowed to work two hours a day. So they had to put about three or I think it was four crews on in the end just to try and get one day's work. So a $40 million damage claim ended up resulting in a $70 million damage claim because of all the extra costs and the extra expense that it came to actually mitigating that loss. And that loss could have been a heck of a lot worse. Going back to that original slide, if you look at what that hairline crack was, if that tornado hadn't gone straight through that site, if it had stayed around for a little while, if there was some flying debris, if it had been going in the other direction, not through that site horizontally, the damage would have been significantly worse and the claim would have been significantly more. So it does just go to show that a lot of these events are happening in places where you wouldn't ordinarily think that they're happening. And when they do happen, your potential to have a much bigger loss than you had originally envisaged is absolutely there. So I said a few moments ago that 80 percent of the solar claims that we have happen from external perils. We've got an extreme lack of experience about what happens in severe wind with regards to oscillation of panels downwind. The one thing that we have actually learned from our experience is that a lot of this stuff at the very front of the project does actually not sustain very much damage. What happens is that you get flying debris and you also get oscillation from the vortexes which have been generated by the front panels. And they are the ones which that's what's causing the damage downstream. And you can kind of see that in the picture on the left hand side. I don't know if you can see my mouse over this, but you can see the panels. This is in Puerto Rico. But you can see the panels here are not very much damaged, but all the panels upstream and up the hill are very much damaged. And a lot of those losses as well are really coming from very, very poor construction practices, underengineered project, as I said, flying debris. Our experience is a construction on solar projects has been rather lackluster. A lot of so-called contractors are coming and putting these installations up, are viewing them as very simple things. They are like Meccano sets or things like that, where they're literally bolting kits together. So they're viewing this as easy construction work to get into. They'll get in, they'll try and do it as quickly as possible, and they'll get out. And there are things that can be done from a construction perspective that would have absolutely saved a lot of these projects. This particular one, had they spent, I think it's something like 14 cents on lockable bolts, a lot of the damage would have actually been, or not have actually occurred, because a lot of the panels would not necessarily have, would not necessarily have been ripped off. So, you know, small spends and small details actually do go quite a long way. And then I spoke about sort of poor construction practice and things like that. And we see this, you know, quite a lot. And it kind of gets into, you know, how much coverage do we want to be giving contractors? And do we want to be naming contractors as additional name insureds on our own parties' policies for things like, you know, defective workmanship, you know, incorrect manufacturing and things like that? You know, do we want to have construction policies which are very broad brush and encompass absolutely everybody? Or do we want to be a little bit more defined in terms of how are we actually looking at contractors on site, subcontractors at site, and ultimately, you know, our overall client, the owner of the project who's having these projects actually built for them? Because a lot of the time, you know, where we see these contractors coming onto site and actually building, they are, they're building in as quick and as fast a way as possible. And it's generic with COVID. And I haven't touched on COVID in this presentation. But a lot of these people are struggling to get personnel. A lot of the personnel can actually go somewhere else and get paid more money. So it's get it up quick, it's get it up cheap. And it doesn't really matter, provided it gets signed off in terms of the way it's built and the way it's done. So we usually now insist on some kind of monitoring throughout the construction phase of the project, we normally insist on third parties coming to site in terms of how things are being done, because time and time again, we are seeing some very poor construction practices actually happening across the industry. And it's not necessarily a fault of the industry. It's I think, it's a fault of, you know, where we are in our in our present times. COVID hasn't helped with anything. The supply chain, the logistics hasn't helped with anything. People want to get onto site and off site as quickly as they possibly can. And it's a very, very competitive industry, especially for the contractors. You know, they are always trying to outbid each other. And they will always bid the lowest price. And nine and a half times out of 10, the project owner will go for the lower price. And that means that when something does go wrong, the way the contractors tend to make their money is through change orders, and things like that. So that's where you know, they're looking to make a dime in terms of putting the project from a contractor, from a contractor's perspective, back into profit. And that doesn't necessarily work from an insurance perspective, especially when it comes to BI, and delay startup claims and things like that. Design issues, you know, I touched upon, you know, we have seen some relatively big design issues, you know, in the industry. And they can be very, it's very, a lot of this stuff is very simple. I spoke about, you know, just using self-locking bolts before and stuff like that, you know, what check and balance has the project actually gone through to make sure that this design is up to a 20-year life or not? You know, we're seeing projects fail anything between one to three years at the moment from a design perspective, because it just hasn't been designed to spec. And a lot of these projects were supposed to be designed for a 20-year lifespan. A lot of the pictures you're seeing here are predominantly on sort of moving arrays and one-axis or two or three-axis designs, where things just, you know, are being built to a cost and not engineered to a certain specification, which is kind of sad, you know, within the industry. And, you know, we can give an example, you know, of that one here, you know, that here's a design where, you know, these panels are supposed to tilt on a single axis, and you can see that the joints or the actual, the members that are designed to drive these panels back and forward have actually compressed, they buckled, they're totally under-engineered, you know, for the job. And, of course, that client of ours argued that there was damage, and you can see that there was damage, and who are we to actually argue with them, you know, one way or the other. But a check and balance from an engineering perspective at the beginning, a check and balance with regards to putting somebody on site, just having a look at this stuff, you know, as it's actually going up, probably even before that, it pays dividends over time. This particular project, in the end, they had to replace all of these members across the entire site, because slowly but surely, every single one of them actually started to fail. So, time for another quick question. Main area of concern when ensuring solar risks, is it a workmanship issue, is it cyber risk, is it lack of skilled labor, or is it micro-cracking? OK, interesting. The quick is a bit of a trick question. This one is a major area of concern, so it's not necessarily where most of the claims have actually occurred. So I would think. Those are also workmanship is probably where most of the claims have actually occurred. The major area of concern at the moment in the industry when ensuring solar risks is micro cracking. So it was a. It was a close second. And let me just take you on and talk about micro cracking for a second. Um? Micro cracking is a real issue within the industry, and we've done papers and things on it. We had a a very large claim, which is looking at my questions on the right hand side of my screen. It may even answer the first question or not. I'll get to it in a second, but. We had a very large claim in Texas and it was a particular project where there were two. There were two parts to the project. There was a North side in the South side and I can't remember which way around it was, but the the North side was completely destroyed and the South side was pretty much intact. A few few panels damaged, but really not too many panels damaged and you can see here this is a basically a photo luminous test that they do on the panels and this is a panel and I'm hoping you can see my my arrow my mouse. And you can clearly see here, you know, damage on the actual PV cell itself. That's very easy to to pick up and you can see it down here towards the bottom. So the big black bits in the actual PV cell are the bits that are very, very clearly been damaged. But all the other dark spots around that actual cell are micro cracks. And what the project actually started to do was to turn around and they could say they said to as well. Our entire wind, sorry, entire solar project is damaged. Everything's damaged. It's micro cracked the whole lot. And we thought, OK, is that damage or is that not damage? Because those particular cells and some of those panels which were just micro cracked, they're still producing electrical energy. And yes, you could argue they're damaged, but how damaged is actually damaged. So we actually took some spare panels from that site which they had in store and we photo luminous those actual cells. And ironically, they were micro cracked as well. And the problem with micro cracking is that. Yeah, it's it. Is it damage? I don't know. That's questionable, but the one thing about micro cracking is that it can occur at the factory. It can occur at the transit to site. It can occur actually during construction and it can occur after a severe event such as hail or windstorm or something like that. And there is no idea as to when or where that micro cracking actually occurred. What I can guarantee to you is that if you have a claim, your client is absolutely going to come back and argue that their panels are damaged because they are micro cracked. So this is a industry wide problem at the moment. How do you define micro cracking? Should it be excluded? Our view is yes, it absolutely should be excluded because it is not as a result of something necessarily happening as a cause of that claim or that particular claim. It is a cause of something that happened somewhere down the line somewhere else at another time, which originally the client was not necessarily making a claim for. So it's an interesting dilemma, the micro cracking dilemma, and it's probably a debate that's going to go on between insurers and the solar industry for quite a long time to come. And again, the problem with testing for this stuff and trying to determine has it happened or has it not is that the tests are probably costing as much as each panel anyway. So then you've got to say to yourself, well, is it really worth actually, is it really worth, you know, doing the testing? Or do you just write the whole lot off? Or is there anything that's actually damaged? You just write off and you say, we're going to pay the loss. It's a difficult one. It's the old adage, you know, is it damaged? Is it not damaged? And sometimes there's no real way to tell. So, kind of in conclusion, before we get to some of the questions, would you write, you know, would you write this risk? I would say yeah, quite possibly, but you've got to be quite careful about how you actually do it. Certainly, I think there has to be decent sublimates for natural perils. If you're going to write this business on an all risk basis, i.e. you're not necessarily a more traditional NatCat insurer, you know, there should be sublimates in there for all natural perils. And I'm not just talking about earthquake or windstorm or flood, I'm talking about this sort of, let's call them softer perils, like hail, or things like that, or tornadoes, as we as we spoke about earlier. I think there should be better definitions in policies about, you know, how we actually go about defining what natural perils are. We spoke about microcracking, and I apologise for this sort of trick question before we actually got into it. And we seriously, as an industry, need to look at, you know, serious loss clauses in terms of how are they actually applying, are they applying, you know, per panel, per array, you know, what are we defining as an actual serious or serial loss, there go my lights again, across the, you know, across an actual project, how's a loss adjuster actually going to interpretate that? And how's it actually going to be defined? I spoke earlier, you know, about engineering, you know, actually having some kind of project monitoring on site, for us is being critically important. But even a pre risk survey, you know, people say these things are actually designed for a 20 year lifespan, we've yet to see a project which is going to survive a 20 year lifespan. So you've got to take that into consideration when you're underwriting. And finally, you know, use some common sense, you know, we all get told time and time again, it's not in a floodplain, it's not in an earthquake area, it's not this, it's not that. But when you actually start to use a bit of common sense, and Google map it, and go over history about flooding in that particular place, and things like that. And you don't even need to be as sophisticated as using RMS. There are many, many tools out there. You know, even Google, as I said, which will give you a very good indication of exactly, you know, how close is this thing to the coast, how close it is to a floodplain. So whilst we may get told that something is not necessarily in a flood zone, sometimes it's so close to it, and just using your your head, and using a bit of common sense, you know, makes an awful lot of sense. So I think that's pretty much all I've got time for with regards to the presentation, I'm just going to look to my right and sort of pick up on some of these questions here. So the question one is, what is the number one natural cat loss that results in solar damage? I would say the answer to that question, without a shadow of a doubt, and we speak from personal experience, unfortunately, is hail. Hail is a major issue for solar panels. Now, there are some manufacturers who are better than others with regards to their resistance to hail. There are some manufacturers that are building hail resistant equipment, and things like that. Those manufacturers are obviously more expensive than others. Their power output, you could argue sometimes is a little bit more. Sometimes you could argue their power output actually is a little bit less. But I would say that the number one issue with regards to the peril that affects solar panels more than anything else, and that's not just in North America, is certainly hail. Number two, ironically, is wildfire. California, and not really restricted to California, if you look at the number of wildfires that occurred, not only this year, but last year, it wasn't restricted to California for whatever reason. California seems to be the most publicized, or certainly the most publicized here in Europe. But there are a number of states which suffer wildfires and things like that. That definitely is number two. We haven't yet seen too many wildfires on our own books, but I know that some of our peers and some of our competitors have seen significant issues with regards to wildfire claims and things like that. So just moving on to question two, what's the most unusual cause of loss you've seen with solar panels? I think the most unusual cause of loss that we've seen is sheep. So where we've seen sheep who are allowed to graze, and it's a great idea, they're allowed to graze around a project, because the most important thing about a project is keeping the grass low, so that if you do have a wildfire, it doesn't burn up and burn the panels and burn the infrastructure that's actually sitting below the panels. The problem with sheep, with goats, things like that, is they like grass, and they can't normally differentiate a cable from a piece of grass, and they will start to eat cables. And I don't want to tell you what happened to the sheep, but they were in a very good state afterwards. But equally, they gnawed through the cables, the cables actually started a fire, and that's what actually burned down the solar project. So that's probably one of our most unusual losses. Other losses that we've seen on solar panels in Italy is that in Italy they love to steal things and they love stealing solar panels, they love stealing copper cable. They're very good at it for some strange reason in Italy. The CCTV is usually turned off when they're stealing it or the security guard has got called in sick that night when they're stealing it. So that tends to be a pretty common theme in that part of the world. So probably two of the more unusual losses or construed losses when it actually comes to solar. Here's a good question. What percentage of the TIV did that tornado loss affect? I'm going to struggle to answer this one off the top of my head, but it was probably about a $600 million project, so the actual damage was about $40 million and the claim ended up being around about $70 million or thereabouts, if hopefully that actually does answer your question. So it wasn't a huge amount of the actual TIV. The thing about that particular claim, and we see it again and again on solar, is the actual additional costs that are associated with doing that. So another one, microcracking seems to have full policy limits, but the cost to prove microcracking is sublimated, is that typical for the industry? It's all over the place with microcracking right now. Some people are excluding it. Some people are sublimating it. Some people are looking for better definitions of it. There is no norm in the industry right now with regards to what is happening from an insurance perspective with microcracking. There's just lots of people talking about it. We have our view on microcracking and how it should be dealt with. Our view is not necessarily a blanket exclusion. Other insurers is that, yes, it absolutely should be a blanket exclusion because there's no other way of dealing with it. What is the main cause of microcracking and how do you prevent it? You don't. Until somebody comes up with a better design and a better way of doing this, you absolutely can't – you actually can't prevent microcracking. It's generic within the industry which we are in, and the industry knows that as well. So it is just what it is. Next one is, my understanding – I'm not going to say the name of the actual claim – was also larger than anticipated due to the fact that the replacement panels required new modification racking, i.e. they were functionally obsolete. Is that a growing concern? Great question. Yes. This is one from Danny. Danny, absolutely, you're right. The industry is evolving at such a rate that it really is actually starting to be an issue where you can build a project one year and you can't get replacement parts for it the next and therefore you end up replacing it with new equipment. So you're effectively doing new for old rather than doing the actual value of the project in the first place. Have you written agrovoltaic risk where PV solar is mixed with an agricultural operation between or under solar panel arrays? Yeah, we have sheep. So they come with their own issue. Sheep and goats, be careful. Do you customarily see the same type of contracts as the rest of construction industry where indemnification and liability is fault-based, negligence? Yeah, we do to be fair. They're pretty much the same type of contracts and they're tweaked a little bit sometimes but to all intents and purposes a lot of the contracts do tend to be relatively standard across the industry. Any insight into how firefighters respond to exposed PV risks minus standing still energy in the panels? Yeah, you're quite right. There is. Firefighters don't respond very well to solar panel fires or battery fires. They tend to stand back and watch it burn. What they will normally do is they will protect surrounding property and as long as they can protect the surrounding property or stop the fire spreading that's what they're kind of there to do. So they won't really do anything else. How do you prevent the industry combating or preventing the risk of wildfire? That's a great one. It's a tough one. The mitigating factors are you've got to keep brush down from around the project. Don't build the projects in the middle of forests and stuff like that. Unfortunately, that's where we're starting to see a lot of these projects. So can it be mitigated to an extent but the very nature of the industry is that it does come without risk and it really is a very real and intrinsic risk across the industry. Back to microcracking again. Has this issue been litigated in courts? Not as far as I know, certainly not from our perspective. We'd rather make our clients whole again as quickly as we can. We've got on and paid some of those claims but it did raise the issue with regards to microcracking. What states or region in the US have the richest opportunity for solar? I would say kind of the more of the sunny states. So California, big one. Interestingly, the Carolinas, Georgia, Florida to an extent and the northeast has been the best places for that. What is the total value of the system? Again, I think I've answered that. That was the California loss that I spoke about earlier. And how do we begin to influence change around how terms are developed? I think as an industry we need to be a little bit more unified in our approach towards the renewables industry. And I think we need to be aware of why am I doing this webinar? Because I think as an industry, we need to start talking about some of the issues collectively that are involved. And so I think the more dialogue that we can have as an industry and talk about these issues, the better off we will be. And frankly, we need to be candid and we need to be upfront with our clients and with our customers. There's a long one here and I'm conscious I'm very much running out of time. So this could be the last one. Year 2050 predicted sources of electricity generation from the first slide. Is this based on current consumption levels? What if all motor vehicles at that time are electric? Will there be enough solar to provide the needed electricity or fossil fuels to be more necessary? You're asking a very biased person that question. I think that there will be enough solar and renewable energy around in 2050 to actually suffice that need for sure. I think the technology will have got to a stage where it really is very, very efficient and very, very effective. So the answer to that question is, will there be enough to sustain all the electrical vehicles on the planet without the need for fossil fuels? Hopefully, I'll be retired and drive my electric car. But my answer to that question would be yes. And I think that I'm probably going to hand it back to Lily and call it a day. I'm sorry to those people that I've got a lot of questions piling at the end and won't have a chance to answer them. But equally, I'd love to take them offline off of this presentation. I'd be very happy to answer them as well. Thank you for a fascinating presentation, Fraser. And wow, thanks to all of our attendees for these amazing questions. I think you have the record, Fraser, for the most questions that have come out of the presentation. And we always use the number of questions that come in to really gauge how interesting the presentation was, because we find that there is a direct correlation with the relevance of the presentation and the number of questions we receive. So thank you for that. Are you ready to go over who is either the most engaged or the best question? I am. I apologize to those people that I didn't get to their question, because I feel like they're being a little bit selected against. But I'm going to go for Gary Greeson on his microcracking question in terms of the full policy limits and the cost to sort of prove microcracking. Should it be sublimated? I think that's a really good question. It's a very relevant question in terms of where the industry is going. It's an issue. You know, there's two things that we need. You know, the two takeaways from this whole presentation are, you know, how are we going to deal with CAT? How are we going to deal with microcracking? And microcracking is the great unknown that's out there at the moment. So that's a good question. So I'm going to go with Gary's question on that one. All right. Congratulations, Gary. We'll send you a $25 Amazon gift card. And to all of our attendees, when you have a chance, please take our survey to provide your feedback to IMUA. And usually, Ali posts it in the Q&A box. I may not see it because we have a lot of questions in here, but we'll also email it to everyone after the presentation. If it's not in the Q&A box, we'll send the survey link to everyone. We want to know what worked well and what IMUA can offer to improve upon. And we also always love to have ideas for future topics. Now, just to close everything out, a little winter trivia question. The first person to answer the question correctly in the Q&A box will receive a $25 Amazon gift card. And this is, how many sides does a typical snowflake have? How many sides does a typical snowflake have? And just type your answer in the Q&A box. All right. We have the winner. The answer is six, and it's Taylor. So, Taylor, love it. Congratulations. And with that, this concludes today's webinar. We look forward to you joining IMUA for new inland marine insurance education opportunities in the upcoming year. Have a great rest of the day and enjoy the holiday season. This ends today's webinar. Thank you. Bye-bye.

Solar Photovoltaic Energy

Underwriting

Risks

Pitfalls

Claims

Inland Marine Underwriters Association

Fraser McLaughlin

Natural Catastrophes

Microcracking

Renewable Energy