Executive Summary
The U.S. solar industry is experiencing remarkable growth, driven by surging demand for clean energy, technological innovation and the broader shift toward electrification. However, this momentum is increasingly challenged by shifting federal policies, supply chain disruptions and a sharp uptick in insurance costs. These dynamics are reshaping project economics and risk management strategies across the solar value chain.
Industry Growth and Market Drivers
- Record Installations: In the first half of 2025, the U.S. added nearly 18 GW of solar capacity, making up 82% of all new electricity generation.
- Demand Surge: The proliferation of AI-powered data centers, alongside electrification in transportation and manufacturing, is driving unprecedented electricity demand and creating new opportunities for solar deployment.
- IRA Momentum: Despite policy headwinds, the Inflation Reduction Act (IRA) continues to support growth through tax incentives and domestic manufacturing requirements.
Policy and Regulatory Challenges
- Federal Rollbacks: The One Big Beautiful Bill Act (OBBBA) has shortened eligibility timelines for key tax credits. Projects must now meet tighter construction and service deadlines to qualify, creating uncertainty for developers and investors.
- Permitting Bottlenecks: New federal permitting requirements are delaying solar development timelines and putting up to 44 GW of planned capacity at risk.
- Supply Chain Scrutiny: Regulations targeting imports from “Foreign Entities of Concern” are complicating procurement and compliance efforts.
Insurance Costs: A Growing Concern
Rising Premiums and Reduced Coverage
- Property Insurance Premiums: Costs for solar projects have risen 15% to 45%, with catastrophic reinsurance rates increasing by an average of 37%.
- Coverage Limits: Limits are shrinking, especially in high-risk zones (hail, wildfire, flood), with many carriers capping aggregate coverage at $5 million.
- Liability and Umbrella Policies: Premiums are rising due to increased claims and long-tail risks associated with power purchase agreements.
Drivers of Insurance Market Hardening
- Extreme Weather: Hail alone accounts for 73% of total loss amounts, despite representing only 6% of incidents.
- Underwriter Hesitancy: Political instability and reduced federal support have led underwriters to tighten terms, shorten policy durations and add exclusions.
- Operational Risks: Inverter failures, module degradation and cybersecurity threats are contributing to 8.6% average underperformance across photovoltaic (PV) sites.
Strategic Implications for Stakeholders
- Cost Pressures: Rising premiums and reduced coverage are increasing the total cost of ownership and complicating project financing.
- Risk Redistribution: Developers are being asked to retain more risk through higher deductibles and narrower coverage scopes.
- Insurance as a Strategic Asset: Proactive site design, hail stow strategies and portfolio aggregation can reduce exposure and improve insurability.
Looking Ahead: Recommendations for Resilience
As the solar industry navigates a complex landscape of growth and risk, insurance is emerging as a critical factor in project viability. Stakeholders should:
- Engage early with insurance advisors to structure coverage that aligns with evolving risks.
- Invest in resilient design, operations and management practices to mitigate weather-related losses.
- Advocate for consistent, transparent policy frameworks to restore confidence among investors and insurers.
The future of solar remains promising, but resilience, adaptability and strategic risk management will be key to its success. Our insurance advisors understand the unique risks and opportunities within the solar sector and can help you navigate this evolving landscape with confidence. Connect with us to explore coverage strategies that support long-term project viability and growth.