www.canopius.com Offshore Wind – Underwriting Challenges Frankfurt – April 21 st 2015 Maarten P.J. Mulder MSc. Eng.
www.canopius.com
Offshore Wind – Underwriting Challenges
Frankfurt – April 21st 2015
Maarten P.J. Mulder MSc. Eng.
Who is Canopius?
Canopius is the global specialty lines platform of Sompo Japan
Nipponkoa Holdings Inc., which has over $90bn total assets.
Canopius is wholly owned by Sompo Holdings’ principal
subsidiary, Sompo Japan Nipponkoa Insurance Inc., an A+ rated
company and one of the top three Japanese P&C insurers.
Canopius Syndicates 4444 and 958 offer strong financial
security, sharing the Lloyd's market Insurer Financial Strength
ratings:
– A+ (Strong): Standard & Poor's
– AA- (Strong): Fitch
– A (Excellent): A.M. Best.
Canopius at Lloyd’s
Source: Lloyd’s annual report 2013
Canopius is the ninth largest managing agent at Lloyd’s with £1bn of written premiums
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Renewable Energy team
Operating out of Amsterdam
Team of 6 specialists with over 50 years of combined underwriting experience in this specialty insurance field
Track record with over 40 offshore wind projects, including:
• Butendiek
• Dolwin I
• Amrumbank
• Baltic I and II
• Global Tech I
• Borkum Riffgrund
• Borkum West
• Nordsee One, …
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Where we are today
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What will be coming up
2015 will see Germany overtake the UK in annual grid connected
capacity
The largest wind farms to be fully completed will be RWE’s Gwynt y
Môr (576 MW) followed by Global Tech 1 (400 MW), both in Q1
Slump in the market in 2016, featuring a low level of wind turbines
being connected
Outside of the UK, only Germany and the Netherlands are expected
to bring capacity online in 2016 with DONG’s Gode Wind and
Westermeerwind
Further in the future some 26.4 GW offshore wind farms are
consented in Europe and future plans for offshore wind farms total
more than 98 GW
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Industry Challenges
Link-up to the electrical grid, power transmission issues, supply and demand
Finance issues. Without comprehensive insurance protection, investors will not provide
capital for these projects
Regulatory issues / public acceptance
Levelised Cost of Electricity (LCoE) offshore
wind too high. Cost price reduction
EUR 160/MWh (2013) EUR 100/MWh
How?
• Standardisation and modularisation
• Emphasis on new technologies, new construction
methods, high level of R&D
• Focus on economies of scale
• Increase competition
Life time expectancy, extension and decommissioning
• Warranted life-span of about 20 years. Realistic?
• Leases awarded for offshore sites will last for 50 years: life time extension?
• End of the lease period: decommissioning? How?
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Underwriting Challenges
Ageing windfarms: expiring manufacturers warranty
Increasing turbine models and sizes
• Prototypical character vs proven technology
• Larger offshore equipment needed for transport, erection and repair
very comprehensive insurance cover including:
• CAR incl. LEG3, full guarantee maintenance, DSU, Marine transit and DSU, long policy periods,
long indemnity periods for BI (overstrained production capacity, limited spare parts and vessel
availability)
lack of PML/MFL understanding: no historic data to validate models
Accumulation of risks vs availability of insurance capital
• Increasing project size up to 1,250 MW (EUR 4.5bn)
• Contingent Business Interruption (suppliers/customers)
• NatCat exposure cumulation: Northsea windstorm
Industry still not fully mature: relative high loss
frequency and severity – some examples
8 Source: 4C Offshore
CAR - claims
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CAR claims
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Some Cable Loss Statistics
Average claim cost: EUR 2,5m
Inter-array cable damage: EUR 1,4m – 4,2m
Export cable damage: EUR 8m – 27,5m
Vessel costs: EUR 100k – 310k p/d
95% of construction projects have experienced cable claims
Main root causes: poor workmanship/design and mechanical damage
Cable claims – some examples
11 Photos courtesy of Lloyd Warwick International (London) Ltd.