UK Offshore Wind 2004

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UK Offshore Wind 2004
Offshore Have Insurers Got It Wrong? Wednesday
3rd March, 2004

• Fraser McLachlan

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Have Insurers Got It Wrong?

• Insurers Now take Wind Power Seriously
• A Positive Message
• A Brief Overview

Photograph courtesy of Nysted
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Have Insurers Got It Wrong?

• Key Issues-
• The Cost
• Terms and Conditions
• Not Risk Free but is Risk Managed

Photograph courtesy of Nysted
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Have Insurers Got It Wrong?

• Offshore Wind Power is Not New
• Danish Insurers got it wrong
• Capacity Up
• London Energy Market Now Writing This Business

Photograph courtesy of www.Vestas.com
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Have Insurers Got It Wrong?

• Energy Market Used To High Risk High Return
• Wind Energy Is a Different Risk
• Market has been educated
• Starting to treat wind power differently

Photograph courtesy of www.Airtricity.com
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Have Insurers Got It Wrong?

• Construction
• Multiple tasks
• Not just one large task
• Operating
• Failure of one unit will not cause a severe loss
• Warranties are provided
• Availability
• Performance
• Breakdown

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Is the price is right?

• Construction
• 1.50 - 2.5 on FCV
• Operating
• 1.00 - 1.50 on FCV
• Realistic Rates
• The Pricing Seems to be about Right!

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Have Insurers Got It Wrong

• Terms and Conditions-
• Construction
• Operating

Blythe Windfarm photograph courtesy of
www.BWEA.com
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Have Insurers Got It Wrong?

• Wind Industry takes on much risk themselves
• Manufacturers or Contractors provide
• Warranties
• Performance
• Availability
• Mechanical issues
• Provide you with OM

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Terms and conditions construction

• Standard Market Wording
• WelCar has been offered
• Viewed as the safest option
• Many insurers too frightened to put up
  alternative terms

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Terms and conditions main issues

• WelCar is designed as owner controlled
• Wind Industry does not work on this basis for
  construction risks
• Risk falls on the manufactures balance sheet
• They are normally principle contractors
• They are happy with this risk

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Terms and conditions other issues

• Benefits of cover are for owner
• Additional work
• Removal of wreck
• Standby charges
• QA/QC

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Have Insurers Got It Wrong?

• An Industry Moan!
• Deals are put together in a shoddy way
• Often on the back of personal relationships

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Have Insurers Got It Wrong?

• An Appropriate Wording - Still a subject of
  negotiation
• Overlapping Cover
• Gaps in Cover
• A Standard Approach
• Brokerage Community must share responsibility

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Have Insurers Got It Wrong? - Claims

• Mainly frequency claims
• During whilst awaiting load out
• Within deductibles
• Blade Damage
• Tower Damage

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Have Insurers Got It Wrong? - Claims

• Offshore severity increases
• Main issues to date
• Cables

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Have Insurers Got It Wrong?

• The Good Operators Should be Rewarded
• Illustrated Rates Were an Average
• They Could be discounted for good risk management

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Have Insurers Got It Wrong? - Summary

• Premium and Deductibles Right
• Terms and Conditions Wrong
• Its 50 of the way there!

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UK Offshore Wind 2004
Offshore Have Insurers Got It Wrong? Wednesday
3rd March, 2004

• Fraser McLachlan