What Your Policyholders Should Know About Battery Energy Storage System Risks
With the growing integration of battery energy storage systems (BESS) in both business and residential settings, many insureds are confronted with new challenges in managing the risks these technologies introduce. Reinsurers can play a crucial role in helping their customers address these challenges by providing specialized equipment breakdown coverage and risk management expertise, which can be essential to navigating the complexities of BESS technology.
As many organizations and consumers turn to renewable energy sources like wind and solar for their electricity needs, they will likely also explore the benefits of BESS, according to Greg McRae, AVP Claim for Equipment Breakdown at BoilerRe. Consider that solar power is generated during daylight hours, yet power demand continues into the night, while wind power is variable depending on weather conditions. The pace and amount of power generation from wind and solar sources do not always match demand, which is why the ability to store excess energy for later use is so important.
BESS usage for residential purposes also continues to grow. “With residential equipment breakdown coverage readily available to homeowners, we’re paying close attention to the increasing number of residential battery storage installations,” said McRae. “Residential BESS installations are becoming increasingly popular due to the growth in electric vehicle purchases and the addition of whole-home backup electrical power systems.”
Understand hidden equipment breakdown vulnerabilities.
The likelihood of the actual battery cells being the direct cause of equipment breakdown or property loss is not high, according to McRae. “Instead, the primary breakdown risks of BESS installations revolve around problems with the electrical distribution equipment such as switchgear [breakers, switches, fuses, reclosers and relays], electrical cables, busways or bus ducts and transformers. These components are more likely to be the source of a breakdown of covered equipment than the battery,” said McRae.
Best practices for insurers offering equipment breakdown coverage.
To minimize breakdown risks, proactive maintenance and routine inspections are crucial, said McRae.
McRae recommends that insurers follow three steps to reduce policyholder risks:
- Conduct routine inspections and maintenance: Encourage policyholders to perform required checks and maintenance on their BESS equipment, starting from the time of installation. Routine inspections and proactive maintenance that complies with manufacturers’ recommendations are crucial for helping prevent BESS-related breakdowns and mitigating risks.
- Hire skilled professionals: Suggest that policyholders hire contractors who are not only skilled in electrical work but also have specific experience with BESS.
- Ensure that electrical infrastructure is ready for BESS: Encourage policyholders to exercise caution with BESS installations within existing electrical distribution systems by ensuring that existing electrical systems receive a clean bill of health from qualified technicians following a thorough evaluation before installation.
Choose equipment breakdown reinsurance backed by deep experience and a strong collaborative approach.
A collaborative approach between insurer and reinsurer helps optimize reinsurance strategies. A deep understanding of the evolving renewable electricity industry and specifically the developments and advancements in the BESS sector empowers insurers to tailor equipment breakdown coverage and services to meet the evolving needs of their policyholders.
Reinsurers like BoilerRe are uniquely positioned to assist insurers in guiding their agents and policyholders through the complexities of BESS risk mitigation strategies.
BoilerRe offers full-service reinsurance that supports equipment breakdown underwriting results and assists policyholders in mitigating their equipment breakdown exposures.
Take the next step to enhance your reinsurance strategy. Contact BoilerRe today to learn how our expertise and collaborative approach can help you navigate the complexities of BESS and optimize your coverage solutions.
