Solar Erection All-Risk Insurance: EPC Contractor Coverage Guide

Insurance is rarely glamorous, but getting it wrong on a solar project can be catastrophic. A single hailstorm, a construction crane collapse, or a fire during commissioning can destroy millions of dollars of modules and inverters — equipment whose replacement lead times stretch to 12–24 weeks from Chinese manufacturers. Without the correct policy, an EPC contractor can face project delays, penalty payments under the EPC contract, and potential insolvency.

This guide covers the insurance framework for solar PV construction and operations: Erection All-Risk (EAR) / Construction All-Risk (CAR) policies, Delay in Startup (DSU) cover, marine cargo insurance for Chinese-origin equipment, third-party liability, and the transition to O&M insurance at handover.

EAR vs CAR: What's the Difference?

The terms are often used interchangeably, but there is a technical distinction:

• Construction All-Risk (CAR): Covers civil engineering works, structural elements, buildings, and associated erection of mechanical and electrical equipment. Used when the project has significant civil works (foundations, roads, substation buildings).
• Erection All-Risk (EAR): Primarily designed for mechanical and electrical plant erection with minimal civil works. In practice, most solar project insurers write a combined CAR/EAR policy that covers both the structural and electrical elements under a single form.

For a ground-mount solar project, a single combined CAR/EAR policy is standard. For a commercial rooftop project with no civil works, a pure EAR policy may be more appropriate and cost-effective.

What Does the EAR/CAR Policy Cover?

A well-structured solar EAR/CAR policy covers:

• Material damage (Section 1): Physical loss or damage to the contract works (modules, inverters, mounting structure, cables, transformers, switchgear) from any fortuitous cause — fire, flood, storm, theft, collision, electrical testing damage, design error (with sublimit for DE clause).
• Third-party liability (Section 2): Bodily injury or property damage to third parties arising from construction activities. Minimum limits of USD 5–10 million per occurrence are typically required by project lenders.
• Existing property (Section 3): For rooftop projects or brownfield sites where existing structures are present, this section covers damage to the principal's property not forming part of the contract works.
• Contractors' plant and equipment: Optional section covering the EPC contractor's own tools, vehicles, and temporary equipment on site.

Delay in Startup (DSU) Insurance

DSU (also called Advance Loss of Profits, ALOP) is one of the most important — and frequently overlooked — elements of a solar project insurance programme. It covers the financial loss arising from a delay to commercial operation caused by an insured material damage event:

• If a hailstorm destroys 30% of the module array on a 50 MW project during installation, the material damage claim covers the replacement modules. But the PPA penalty clock started ticking from the contracted COD date. DSU covers the lost revenue (or PPA liquidated damages) during the additional 3–4 months needed to source and reinstall replacement modules.
• DSU cover requires a material damage trigger — the delay must be caused by an EAR/CAR insured event. Delays due to permitting problems, grid connection delays, or contractor inefficiency are not covered.
• The indemnity period should equal the maximum realistic replacement period for the most critical single item — for a utility-scale project importing modules from China, this is typically 6–12 months.

Marine Cargo and Transit Insurance

When procuring equipment from China — LONGi, Jinko, JA Solar modules; Sungrow, Huawei, GoodWe inverters; CATL or Pylontech battery systems — the equipment is at risk from the moment it leaves the factory until it is installed on site. Marine cargo insurance covers this exposure:

A key decision is whether to use CIF (Cost, Insurance, Freight) terms — where the Chinese supplier arranges and is responsible for marine insurance — or CPT/DAP terms where the buyer (EPC contractor) controls the marine cover. For bankable projects, buyers and their lenders almost always prefer to control the marine insurance directly, ensuring the policy wording, limits, and insurer ratings meet lender requirements. Econo Solar can supply equipment on EXW, FOB, CIF, or DAP Incoterms depending on your preferred risk allocation.

Policy Wording: Key Clauses to Review

Not all EAR/CAR policies are equal. The following clauses are frequently negotiated for solar projects:

• Design Exclusion (DE) Clause: Standard policies exclude damage caused by defective design. The Munich Re DE Clause (or equivalent) reinstatement wording is strongly preferred — it covers consequential damage to correctly designed parts caused by failure of a defectively designed component (e.g., if a defectively designed mounting bracket fails and the falling array damages correctly installed inverters).
• Testing and Commissioning: Ensure the policy explicitly covers damage during hot-commissioning (energisation, inverter startup, grid synchronisation) — this is when electrical testing damage is most likely to occur.
• Hail exclusion: Some policies in hail-prone regions (Central US, Australia, northern India) exclude or sublimit hail damage. For large module arrays, uncapped hail cover is essential — negotiate hail as a named peril without sublimit.
• Vibration, Removal of Support, Weakening of Support (VRWS) exclusion: Often applied for civil works; negotiate a carve-back for solar mounting structures on ground-mount systems.
• Maintenance period extension: The policy should extend through the 12-month maintenance (defects liability) period after handover to principal, or be replaced by an equivalent O&M policy at COD.

Insurance Requirements Under EPC Contracts

FIDIC-based EPC/Turnkey contracts (Silver Book) require the contractor to procure CAR/EAR insurance with minimum limits stated in the Particular Conditions. Lender requirements (from project finance banks using the Equator Principles) typically add:

• Insurer rating minimum: A- (AM Best) or BBB+ (S&P) for the lead underwriter on the CAR/EAR policy.
• Lender named as additional insured and loss payee on the material damage section.
• 30-day notice of cancellation or material change sent to the lender.
• Cross-liability clause (each insured treated as a separate party for third-party liability purposes).
• Waiver of subrogation against the principal and lenders.

Transition to O&M Insurance at Commercial Operation

At the point of Provisional Acceptance or Commercial Operation Date (COD), the EAR/CAR policy expires and is replaced by an operational insurance programme covering the full project life (typically 20–30 years). Operational covers include:

• Property All-Risk (PAR): Physical damage to the operating asset — modules, inverters, BESS, cables, transformers, site infrastructure. Annual premium: 0.1–0.2% of asset replacement value (ARV).
• Business Interruption (BI): Loss of revenue/profit following a PAR insured event. Cover period typically 12–18 months; crucial for projects with PPA obligations.
• Public Liability / General Liability: Third-party bodily injury and property damage arising from site operations. USD 5–25 million limits depending on site proximity to populated areas.
• Environmental Liability: Contamination from battery electrolyte, transformer oil, or module glass breakage — increasingly required by lenders for BESS-integrated solar projects.

Econo Solar's procurement team works with project developers to produce an accurate and complete Bill of Materials for insurance valuation purposes. Accurate ARV documentation prevents underinsurance at claim time. For a complete factory BOM with replacement cost data, submit your request here.