UK Offshore Wind 2004 Fraser McLachlan Offshore – Have Insurers Got It Wrong? Wednesday 3 rd March, 2004.

UK Offshore Wind 2004

Fraser McLachlan

Offshore – Have Insurers Got It Wrong?

Wednesday 3rd March, 2004

Have Insurers Got It Wrong?

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

Photograph courtesy of Nysted

Have Insurers Got It Wrong?

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

Photograph courtesy of Nysted

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

Have Insurers Got It Wrong?

Photograph courtesy of www.Airtricity.com

Energy Market Used To High Risk High Return Wind Energy Is a Different Risk Market has been

educated Starting to treat wind power

differently

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

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!

Have Insurers Got It Wrong

Terms and Conditions:-

– Construction

– Operating

Blythe Windfarm photograph courtesy of www.BWEA.com

Have Insurers Got It Wrong?

Wind Industry takes on much risk themselves

Manufacturers or Contractors provide: Warranties

– Performance– Availability– Mechanical issues

Provide you with O&M

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

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

Terms and conditions – other issues

Benefits of cover are for owner

– Additional work

– Removal of wreck

– Standby charges

– QA/QC

Have Insurers Got It Wrong?

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

relationships

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

Have Insurers Got It Wrong? - Claims

Mainly ‘frequency’ claims During whilst awaiting load out Within deductibles

– Blade Damage

– Tower Damage

Have Insurers Got It Wrong? - Claims

Offshore severity increases Main issues to date

– Cables

Have Insurers Got It Wrong?

The Good Operators Should be Rewarded

Illustrated Rates Were an Average They Could be discounted for good

risk management

Have Insurers Got It Wrong? - Summary

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

UK Offshore Wind 2004

Fraser McLachlan

Offshore – Have Insurers Got It Wrong?

Wednesday 3rd March, 2004