Gary Ladman - AEGISlink · Gary Ladman Vi c e P r e s i d ... –Siemens SGT-8000H / Siemens...

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2015 PHC

Energy Construction: Risks and Capabilities

Gary LadmanV i c e P r e s i d e n t – P r o p e r t y U n d e r w r i t i n g

A E G I S I n s u r a n c e S e r v i c e s , I n c .

2015 PHC


Stuart AdamS e n i o r V i c e P r e s i d e n t

M c G r i f f , S e i b e l s & W i l l i a m s

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2015 PHC

• Significant up tick in activity over past 12-18 months across

a diverse spectrum of the energy space

– Regulated utilities (Rate Base)

– Midstream; pipelines, processing and storage companies

(tariff and / or contracted revenue base)

– Independent power producers (PPA, ISO capacity market,

creative hedges)

– Renewables-predominantly PV solar (PPA, subsidized)

Construction Activity 2014-2015

2015 PHC

• PV Solar (2 MW - 250 MW’s)

• Greenfield and expansion of gas processing facilities

• Compression / pump facilities for pipelines (heavy HDD demand

but limited demand on underground pipe)

• Oil storage (predominantly Midwest region)

• Repowering of coal plants with gas turbines

• Deep water floating spars (more limited based on size and scope)

• Greenfield natural gas power plants (mostly quick response units

but some traditional plants based on PPA/ISO)

• Coastal LNG (emerging activity)

Builder’s Risk-Sample Project Activity 2014-2015

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2015 PHC

Builder’s Risk Insurance Marketplace

Limited #

of large

projects

Ample

capacity

Low

losses

• Total worldwide power generation

capacity at all time high of $3 billion+ on

a PML basis

• Favorable five-year industry loss history

• Year-over-year rate reduction trend

for last five years

• Fierce underwriter competition for

desirable projects based on market’s

growth budgets and abundant capacity

• CAT exposure is the largest premium

driver for projects in CAT Zone 2

or greater

2015 PHC

• Significant pressure on terms and conditions from lender’s

consultants (financed projects)

• Pressure from EPC contractor to place insurance rather than owner

– Control (financing / DSU) and cost concern that is best

managed with an “open book” approach and addressing

the interests of each stakeholder. Market can accommodate

extra expense, professional fees and demolition which are

typical concerns of contractor.

Construction Trends

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2015 PHC

• Capacity is growing but lead market capacity remains fairly

consistent

• Market cautious on certain technologies (deductible and

rate impact)

– GE LMS100 / GE 7FA.05

– Siemens SGT-8000H / Siemens SGT6-5000F

• Owners evaluating CIP approach to manage casualty exposures

associated with large projects (usually a minimum of $100 million

hard costs required)

Construction Trends

2015 PHC

• A centralized insurance program under which one party procures

insurance on behalf of all parties performing work on a

construction project

• A CIP may be sponsored and paid for by either the owner or the

construction manager / general contractor:

• In some instances, the owner and construction manager /

general contractor will share in program sponsorship and potential

risk rewards

CIP Evaluation

What is a CIP?

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2015 PHC

• Coverages typically offered in a CIP can vary and may include

– Workers' Compensation and Employers Liability

– Commercial General Liability

– Umbrella / Excess Liability

– Architects and Engineers Errors & Omissions Liability

(sometimes)

– Environment Liability (sometimes)

CIP Evaluation

2015 PHC

• Broader coverage for owner and contractors – Owner is able to

arrange coverage that is often superior to that available to a

contractor purchasing coverage individually

• Uniformity of coverage – One policy form vs. varying policy

forms across all the contractors and subcontractors policies

• Dedicated limits – Specific limit for the project vs. potential for

eroded aggregate limits on contractors and subcontractors policies

• Insurer stability – The owner controls financial rating chosen for

program and has a limited number of carriers to track

Advertised Advantages of CIP

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2015 PHC

• Coverage disputes, litigation and subrogation – All eligible participants insured

under a single insurance program, reducing the potential for litigation and

disagreement between participants

• Enhanced risk management, safety and loss control – Provides a unified risk

control and safety program for all participants

• Open bidding to disadvantaged firms – Stringent insurance requirements that

might eliminate disadvantaged business enterprises from the bidding process are

removed

• Claims management – Individual contractors may not have return-to-work

programs, modified duty programs, effective medical bill reviews, on-site first

aid or other attributes that can greatly reduce claims costs. A CIP provides

enhanced claims management techniques to all participants

• Cost Savings – Loss sensitive program of CIP is more economic if loss activity

is favorable


2015 PHC

• Know what you are getting into!


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2015 PHC


Deborah Gaffney, CPCU, ARMD i r e c t o r , R i s k M a n a g e m e n t

S o u t h e r n C o m p a n y

2015 PHC

• Mutual difference

• Large block of capacity

• Ability to tailor policy language

• Loss control services

• Claims handling

Builder’s Risk / AEGIS and Southern Company

Partnership

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2015 PHC

Southern / AEGIS Builders Risk Placements

Size of Project Description

$1,200,000,000New construction: gas generation –

AEGIS quota-share (QS) participant 18.5% p/o 100%

$ 250,000,000

New construction: gas generation

AEGIS Lead 80% QS placement $200 million p/o

$250 million

$ 96,500,000 New construction: gas pipeline – 100% AEGIS

$4,200,000,000New construction: IGCC generation excess placement

AEGIS lead 40% p/o 100%

2015 PHC

Kemper County Construction

AEGIS participates on builders risk program

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2015 PHC

Kemper County Construction

AEGIS participates on builders risk program

2015 PHC

• Notified officially early August that our builders risk carrier

was reducing limits October 1 due to increased values and PML /

MFL analysis

• Needed to replace or find excess capacity within a 60-day

window – mid-construction that was innovative technology

AEGIS Responded to Challenge

Aug 8

PML / MFL

provided to

AEGIS

Underwriter

Sept 9-11

Onsite

Inspection by

AEGIS Loss

Control

Sept 12

Notified of BR

Insurer’s intent

to lower limits

10/1

Oct 1

Excess program

bound

AEGIS/London

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2015 PHC

• AEGIS Loss Control Services responded – performed a

three-day inspection and review of our facility to determine PML /

MFL scenarios

– This was essential

• In determining amount of excess insurance needed

• For underwriters to become comfortable with the risk

– AEGIS Loss Control engineers

• Experienced in our industry and with gasification

technology

• Came prepared

AEGIS Loss Control Rose to the Challenge

2015 PHC

• AEGIS Underwriting responded – was able to evaluate risk, price

and underwrite the program within the short window

– Loss control report and MFL / PML assisted with underwriting

and pricing

– Came on mid construction

– Provided full $200 million capacity

• We were able to bind $500 million excess of $350 million

by October 1, 2014

AEGIS Underwriting Was Stellar in Their Response

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2015 PHC


Brian M. MaddenS e n i o r P r o p e r t y U n d e r w r i t e r

A E G I S I n s u r a n c e S e r v i c e s , I n c .

2015 PHC

• AEGIS can offer up to $200 million in capacity

– In addition, AEGIS capacity can be supplemented by

the consortium

• Consortium can provide additional $50 million in capacity

– AEGIS operates with NEIL, another Bermuda-based

industry mutual insurer, to provide this capacity

• Term length of Construction projects can vary

– AEGIS has the ability to write construction policies

with terms up to 60 months

Energy Construction: Risk and Capabilities

AEGIS Construction: capacity

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2015 PHC

• AEGIS provides All-Risk Onshore Property coverage for

construction risks

– Catastrophic (“CAT”) perils are each covered by a sublimit

to the policy aggregate

• Flood, named windstorm & earthquake perils

• Other major construction covers include: inland transit, hot

testing, offsite storage, and time element including delay in start-

up (“DSU”) and extra expense

• Additionally, terrorism coverage can be purchased with

construction policies


AEGIS Construction: coverage provided

2015 PHC

• AEGIS writes Builder’s Risk / Construction policies for projects

that parallel the All-Risk Operational programs

– New generation projects: traditional & alternative

• Traditional: coal and gas

• Alternative: biomass, geothermal, solar and wind

– Rehabilitation: coal, gas, nuclear

– Facility upgrades: environmental (scrubbers)

– Natural gas: pipelines, compressor stations, meter stations

• Able to write projects for investor-owned, private, municipal and

cooperative energy and utility companies


AEGIS Construction: types of projects underwritten

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2015 PHC


Electric

(Integrated Co.)

45.6%

Gas / Electric

(Combined / Integrated Co.)

28.1%

Other

5.5%Gas Other

(Storage / Proc.)

2.7%

Unregulated

Electric Generation

14.7%

Business orientation of classified construction risks

Other

Alternative Fuel / Renewables

Electric Distribution Only

Gas Transmission

Only

3.4%

2015 PHC

• Construction risk premiums have accounted for approximately

6.0% of gross written premium in the Property department each

year since 2000

– 2006-2008 were historically the strongest, with AEGIS having

written about $15 million each year in construction premiums

– As a result of the changing utility environment and economy,

AEGIS has seen a dramatic decline in construction projects

• Overall, the loss history for the construction book of business has

been profitable over the past fifteen (15) years of coverage


AEGIS IBM Cognos

AEGIS Construction: underwriting experience

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2015 PHC

• AEGIS Property continues to seek new construction risks in

the industry as prior results have proved favorable over the history

of the product

• AEGIS has decades of knowledge and expertize in Loss Control

and can provide highly beneficial engineering services to our

membership

• Furthermore, AEGIS employs numerous technical underwriters

to provide quotes, options and alternatives for your company

• We look forward to providing you with continued superior results

on all your current and future energy construction projects


AEGIS Construction: looking ahead

2015 PHC

• Gary Ladman, Vice President

– [email protected], 201.508.2802

• Justen Byrne, Vice President


• Sheldon McCaman, Underwriting Officer


• Gary Hawk, Underwriting Officer


• Stephen Scovil, Underwriting Officer


• Brian Michael Madden, Senior Underwriter



AEGIS Construction: Underwriter contacts

mailto:[email protected]






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2015 PHC


Joshua M. FleischerV i c e P r e s i d e n t P r o p e r t y O p e r a t i o n s

A E G I S I n s u r a n c e S e r v i c e s

2015 PHC

To assist AEGIS member companies to maintain safe and effective

operating systems while reducing their overall long term cost

of risk by developing and providing products, services and training

programs specifically designed for this purpose

AEGIS Loss Control Mission Statement

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2015 PHC

Page 31

2015 PHC

• Property Loss Control staff

– Extensive experience in electric and gas utilities

– Average 30+ years experience

– Active in NFPA Committees (e.g. 850, 85,18, 18A)

– Active in industry organizations (e.g., Edison Electric

Institute Loss Control / Fire Protection Task Force, Society

of Fire Protection Engineers and American Society of

Mechanical Engineers)

– Presentations to industry organizations and conferences

• Doble, PowerGen, EPRI Steam Turbine / Generator

User Group

Page 32

Property Engineering Services

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2015 PHC

• Mr. Mark Boone

Manager, Corporate Risk Engineering

Dominion Resources Services, Inc.

• Mr. Stephen P. Ford

Manager, Corporate Security &

Risk Management

Mississippi Power Company

• Mr. Robert A. Green

Senior Consultant, Risk Management

PSEG Services Corporation

• Mr. John C. Mellette, ARM, CSP

Manager, Corporate Insurance

SCANA

• Ms. Sandy Meyers

Director, Risk Management

City Utilities of Springfield, MO


AEGIS Loss Control Task force

• Mr. David S. Nalepka

Director - Insurance Services

Integrys Business Support, LLC

• Mr. John C. Norman

Manager, Insurance and Claims

Iberdrola USA Management Corporation

• Mr. Ronald D. Rispoli, CRM

Director Property Risk/Risk Engineering

Entergy Services

• Ms. Cindy Stevens

Insurance Risk Manager

Colorado Springs Utilities

• Mr. Karl Zimmel

Director, Risk Management

Tucson Electric Company

2015 PHC

• Risk assessments

– Conducted 582 risk assessments for electric & gas

operations in 2014

– Property, machinery, and builders risk

• Focused services

– Steam turbine water induction system evaluations

– Hydrogen system evaluations

– Transformer / electrical apparatus reviews

– Flood / storm surge evaluations

– MFL / PML evaluations study

– Boiler controls & safeguards evaluations

Page 34


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2015 PHC

• Property risk assessments

– Risk reduction suggestions

• Prioritize suggestions based upon

severity and probability

• Develop loss expectancy prior, cost

to complete, loss expectancy after

for capital expenditure type

suggestions, if requested

– Special hazard reviews

– Review of loss control programs

– Water supply and fire protection

systems review

– Business interruption evaluations


2015 PHC

• Machinery risk assessments




– Operational history and procedures review

– Maintenance program reviews

– Assessment of equipment condition,

operational controls and protective systems

– Machinery risk ranking


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2015 PHC

• Builders risk assessments

– Pre-construction design consultations




– Plan reviews for water supplies and

fire protection systems

– Review of loss control programs

– Turnover and start-up procedures


2015 PHC

• Additional focused services

– Insurance diagrams

– Hydraulic analysis sprinkler systems and water supplies

– Plan reviews for new construction or major renovation projects

– Water supply testing (e.g. fire pump testing)

– Combustion turbine technical consultation

• AEGIS liaisons with all major manufacturers

(e.g. GE, Siemens, MHI, Rolls Royce, Alstom, etc.)

– Webinars on select topics or issues

Page 38


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2015 PHC

• Utility Machinery Seminar

– Hosted every two years

– Last seminar conducted in Pittsburgh (107 attended)

– Presentations on technical issues relating to critical equipment

– Presentations from member companies, vendors, and AEGIS

Loss Control

• Presentations available on AEGIS website

– Next Seminar will be in 2016 (location TBD)

Page 39


2015 PHC

• Fire protection training course

– Held annually for the benefit of the

member companies

– Training at Liberty Mutual facility

• Wausau, WI in November, 2015

– Classroom and hands-on training

environment

– Topics include

• Power plant hazard identification

• Fire protection design concepts

• Fire pumps and water supplies

• Sprinkler systems

Page 40


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2015 PHC

• ‘My Risk Assessment’ portal

– Track risk assessments schedules and report status

– View Risk Reduction Suggestions (RRS) and categorize by

• Type (i.e., machinery or property)

• Priority (priority 1 through 5)

• Asset and sub-asset

– Released in Spring 2015

• Ability for member to access their risk assessments

• Ability to upload documents, responses, and pictures

pertaining to RRS

Page 41


2015 PHC

• Howard Somers

Vice President/Division Head

Loss Control

201.508.2734

[email protected]

• Scot Macomber

Vice President

Utility Operations

201.508.2739

[email protected]

• Tom V. Clark

National Property Supervisor

Property Operations

201.508.2755

[email protected]

AEGIS Loss Control

Questions?

Contacts

• Joshua Fleischer

Vice President

Property Operations

201.508.2637

[email protected]

• Juan Toribio

Manager

Property Operations

201.508.2722

[email protected]

• Jim Mintel

National Machinery Supervisor

Property Operations

201.508.2741

[email protected]







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2015 PHC

Gary Ladman - AEGISlink · Gary Ladman Vi c e P r e s i d ... –Siemens SGT-8000H / Siemens...

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