Insurance company tackles climate change problems - 30 Jun 2009

German reinsurer Munich Re, facing billions of euros in claims for damage caused by climate change in coming years, is seeking to drum up support for an ambitious plan to build solar parks in the Sahara desert.

As a risk carrier, the company recently announced its contribution to a low-carbon energy supply by providing planning certainty for those investing in new power-plant technologies in the form of innovative insurance solutions. This could even include the exploitation of solar energy on an industrial scale in the deserts of North Africa. In the medium term, it could realise new business potential and combine energy security with climate protection.

Munich Re offers the market risk-transfer solutions for all forms of renewable energy use. Whether it is a matter of classic water and wind renewable energy forms or new methods of power generation involving solar thermal plants or photovoltaics, ultimately it is always about minimising the risks for investors. As a leading reinsurer, they are accordingly tapping into new business segments."

The most recent example of an innovative insurance solution is the performance guarantee cover for producers of photovoltaic modules, which is meeting with a very positive market response. The insurer gives producers an opportunity to purchase insurance covering them in the event that mandatory reserves for claims under performance guarantees prove insufficient. Whilst that solution is geared to the technical quality of photovoltaic modules, other performance guarantee solutions cater for nature's whims. It is true that, as primary energy forms, sun and wind are available free of charge. However, that availability fluctuates considerably over time, even in highly suitable locations. Munich Re therefore offers special wind and solar energy policies that minimise earnings volatility and are designed to meet the specific coverage needs of investor or financing bank. They also have insurance solutions tailored to the uncertainties involved in constructing the numerous offshore wind farms currently being planned, in which many billions of euros are earmarked for investment in the next few years, and in the field of geothermal energy. This is an area where success is crucially dependent on whether enough water is found at sufficiently high temperatures when a well is sunk. Often investments in excess of €10m per project are at risk.

Electricity produced in solar thermal power plants in North Africa and transported from there to Europe via new, direct current power grids could play a key role in the sustainable energy mix of the future. The company revived the six year old DESERTEC concept: DESERTEC is clearly banking on the right incentives in the long term, namely climate protection and a low-carbon energy sector. Munich Reis therefore commencing a dialogue with visionary thinkers and companies that, like them, are convinced of DESERTEC's enormous economic, ecological and social potential.

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