Munich Re has introduced insurance coverage with the U.S. lighting company Xicato that includes five-year performance guarantee on its LED modules for color consistency and lumen maintenance. Munich Re will now assume a portion of the financial risk the guarantee entails.

Despite their initial higher price, LED lights are overall less expensive than other light sources because of their longer service life and energy savings. Industry studies forecast a multiplication of sales in the coming years due to the ecological, economic and digital control benefits of LED lighting compared to conventional light sources and to new laws.

Until now, Munich Re said, LED warranties have generally covered catastrophic failure and workmanship issues for a period of one year. Munch re said its Xicato warranty is the first of its kind to address real market concerns. The coverage parallels the guarantee that San JosĂ©, Calif.-based Xicato gives its customers “that after five years the color composition will be substantially unchanged and that the light output of its modules will be at least 70 percent of the original level. If that is not the case, Xicato replaces any defective modules with new ones.”

Before agreeing to the performance guarantee cover, Munich Re said it had conducted an in-depth examination of Xicato’s development and manufacturing processes. Munich Re brought in one of its specialist primary insurers to write the cover.”

With this coverage, Xicato can partially relieve its balance sheet of the long-term, technical guarantee risk and use the capital thus freed up for purposes such as investment, According to the insurer.

“We see a trend where end-users, especially in the retail and hospitality markets, require a much higher comfort level that the LED solutions they install actually deliver,” said Xicato CEO Menko de Roos.