In the scramble to meet the new rules under the One Big Beautiful Bill Act (OBBBA), the U.S. solar industry has been laser-focused on supply chains, tax-credit eligibility and the looming Foreign Entity of Concern (FEOC) guidance.
But there’s another player in this compliance ecosystem that’s quietly gaining influence: the insurance industry.
A New Layer of Scrutiny
For years, insurance sat quietly in the background of project finance — a requirement to unlock construction debt, tax equity and long-term operations. Today, it’s becoming a subtle but influential checkpoint.
While insurers aren’t rejecting projects outright over FEOC or OBBBA compliance, many are asking harder questions. Underwriters increasingly want to see whether a project’s equipment sourcing, supplier structure and risk allocations could expose them to recapture, tariff or import-related claims.
This shift isn’t coming out of nowhere. Several factors are pushing insurers to take a more conservative stance:
- Rising loss ratios. Hail, fire and other natural-catastrophe losses have increased over the past two years, particularly in solar. Hail alone now causes more than half of solar panel weather-related claims in the U.S., according to Insurance Business Magazine.
- Capacity constraints. Some global carriers have reduced renewable-energy exposure following high-profile weather losses.
- Regulatory uncertainty. Pending FEOC guidance and evolving import rules have created legal gray zones that could affect the validity of tax credits — and therefore, asset value.
As one underwriting executive put it to Insurance Business Magazine, carriers aren’t saying “no,” but they are saying, “show us more.”
OBBBA, FEOC and the Compliance Domino Effect
The IRS’ August 2025 Notice 2025-42 eliminated the 5 percent “safe-harbor” test for most new wind and solar projects, making the Physical Work Test the primary way to establish when construction begins. An exception remains for small “low-output” solar projects (≤ 1.5 MW AC), which may still use the 5 percent safe harbor through July 5, 2026.
The change applies prospectively: large wind and solar projects that have not begun construction before September 2, 2025, must now rely on physical construction rather than “continuous efforts.” The IRS also clarified that developers must show ongoing physical work, not just administrative progress, to maintain eligibility.
Meanwhile, the current and pending FEOC rules will layer on top of that compliance burden.
Together, these policies tie compliance to every layer of project finance. Lenders are demanding tighter documentation and insurers — who provide the performance, casualty and delay-in-startup coverage lenders require — are verifying that their exposure won’t extend to assets later ruled non-compliant or ineligible for credits.
This isn’t about whether insurers support domestic-content policy; it’s about whether they can quantify the risk if those policies change mid-stream. And that uncertainty is already slowing the market.
What Developers Are Seeing on the Ground
Developers and brokers report several visible trends:
- Longer underwriting timelines. Reviews now take weeks longer as underwriters request more granular supplier certifications and traceability data.
- FEOC-related questionnaires. Some carriers have added supplemental questions about supply-chain visibility and “foreign ownership or control.”
- Policy limitations for tariff or import disruption. Standard property or delay-in-startup (DSU) policies often exclude pure tariff or import-restriction losses, pushing developers to explore separate political-risk or trade-credit coverage.
- Premium adjustments tied to documentation quality. Projects with full traceability and supplier attestations are seeing lower quotes; those without face surcharges or restricted coverage.
Individually, these changes aren’t dramatic — but together, they’re slowing how quickly projects can move from contract to close.
Why Compliance Still Defines the Winners
If there’s one clear takeaway, it’s this: compliance equals confidence.
Manufacturers and sponsors that can demonstrate full adherence to FEOC, OBBBA and import rules aren’t just protecting their tax credits — they’re making it easier to secure insurance, financing and execution certainty.
Practical steps that matter most today include:
- Maintaining end-to-end traceability of cells, wafers and modules.
- Incorporating FEOC indemnities and warranty clauses into supplier contracts.
- Preparing insurance-ready documentation packets that align with lender and Treasury standards.
- Monitoring tariff and AD/CVD updates and adjusting procurement timelines proactively.
As highlighted in the 2025 Energy Insurance Market Update by RPS Insurance, solar remains an outlier: while most renewables have seen flat to single-digit rate movements, solar property premiums remain elevated due to hail and supply-chain risk. Carriers reward visibility — the clearer a project can show where its equipment came from, and how it complies, the faster and more affordably it’s underwritten.
The Bottom Line
Insurance hasn’t suddenly become a roadblock, but it’s increasingly a pressure valve that reveals how well a project is prepared for the new regulatory reality.
Every piece of the solar finance stack — from lenders and developers to underwriters and tax advisors — now shares the same concern: If a project isn’t demonstrably compliant with FEOC and OBBBA rules, it’s not just a policy risk — it’s a credit risk.
That makes compliance not just a legal requirement but a business strategy — one that will separate tomorrow’s bankable projects from those that never make it off the drawing board.