Green energy projects generate captive interest

01/12/2009

The procurement of billion-dollar green energy projects planned for the US desert has led large firms to consider captives to cover closure/post-closure liability.

One firm involved with the development of an algae farm for bio-diesel is on the verge of setting up a series of captives to meet municipality regulatory requirements while sidestepping the outrageously high demands of the external market, Gary Osborne, president of USA Risk Group, has revealed.

“We are 90% of the way there,” said Osborne. “These are untested billion-dollar projects so insurance companies want an arm and a leg for it. These sorts of projects are multinational and involve investors from all over the world, so we expect to see these companies forming multiple captives.”

According to Osborne, the algae farm venture is currently considering a Vermont captive to write US risk, one in Bermuda and another in Malta to write directly into the EU.

“One will be a fronting captive and the others will address investor concern around financing risk in conjunction with reinsurance and funding,” said Osborne. “We are looking at large primary layers of retention covering standard environmental concerns derived from any energy project.”

As investment into green energy becomes increasingly prevalent, Osborne expects to see similar interest in other forms of alternative energy.

“We recently had a solar farm project come to us with similar issues and we also expect activity around wind farms,” he said.

(See the next issue of Captive Review for more on this story)