German insurers open their books for offshore wind farms

“In the past, offshore insurance had been a pure sellers’ market in Germany in which clients had to solicit for cover. Unfortunately only very restricted cover was sold there,” said Patrick Wendisch, Managing Partner of Bremen-based broker Nordwest Assekuranz, which belongs to Lampe & Schwartze.

As a result German operators and investors had to go to the international market to get adequate cover. “Now leaderships and high cover limits with even better conditions are available also in Germany,” said Mr Wendisch.

Due to lack of experience with offshore projects, German insurers were previously reluctant to grant cover. That had been a major problem for the country’s wind farm operators. Without adequate insurance policies that cover, for example, loss of revenue due to delays in the commencement of operations, offshore projects are not manageable. “Without cover no bank will give credit approval,” said Mr Wendisch.

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In the first half of 2011, Nordwest Assekuranz placed project cover for two wind farms with major participation from German insurers. The first was for the wind farm ‘Meerwind’ in the North Sea. Danish insurer Codan leads the policy, but German insurers HDI-Gerling, Allianz Global Corporate & Specialty and the German arm of AXA have taken big parts of the risk.

HDI-Gerling even took over the leadership of the insurance consortium of the second offshore park ‘Riffgat’, which is situated near the island of Borkum.

Mr Wendisch believes that German insurers are not willing to let all the offshore business go to Scandinavian and UK companies any longer. “It is a gigantic market which is developing offshore,” he said. The expected premium volume is a good deal higher than with conventional power generation. “For the coverage of an offshore wind farm about ten times more risk premium is demanded compared to a coal-fired power plant,” he said.

Also, with regards to the conditions for the offshore cover, German insurers are more broad-minded, said Mr Wendisch. For ‘Meerwind’ and ‘Riffgat’ insurers granted comprehensive cover for consequential damage as well as contingent business interruption policies covering lack of revenues for two years if the power generated cannot be supplied. “This takes a lot of uncertainty away from the project,” said Mr Wendisch.