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

Have Insurers Got It Wrong? Photograph courtesy of  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% % 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

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 3 rd March, 2004