2014 Winners List

2014 Risk All Stars

Topics: Risk All Stars

Jeff Driver: A Driven Visionary

Chief Risk Officer, Stanford University Medical Center

Jeff Driver’s efforts ensure consistent risk management throughout the Stanford University Medical Center and its Accountable Care Organizations.

Leslie Lamb: Cross Talk (+Responsibility Leader)

Director of Global Risk & Resiliency Management, Cisco Systems

Leslie Lamb started off a dialogue within Cisco Systems about exposures that helped mitigate risk while better informing underwriters and brokers.

Zachary Gifford: Finding the Balance

Associate Director for Systemwide Risk Management, The California State University

Protecting the California University System from risks associated with campus sports clubs took Zachary Gifford’s leadership and collaboration.

Thomas Dunbar: Protecting His Company

Chief Information Risk Officer, XL Group plc

By using cyber security education and other tools, Thomas Dunbar reduces the risks at his company.

 

David Hershey: Standing up for Insureds (+Responsibility Leader)

Risk Manager, Sprague Operating Resources
(Axel Johnson Inc.)

David Hershey made sure that insurers for his company’s vendors and suppliers complied with notification requirements for when insurance was cancelled or not renewed.

Steve Stoeger-Moore: Alternative Vision Saves Millions (+Responsibility Leader)

President, Districts Mutual Insurance

By creating a mutual insurance company for 16 technical colleges, Steve Stoeger-Moore saved the group $10 million in premium over the past 10 years.

Janine Pitocco: Do It Safely or Don’t Do It

Environmental, Health and Safety Manager, FM Global

Janine Pitocco’s emphasis on safety and training programs has reduced the number of OSHA-reportable injuries by 70 percent.

Dan Holden: Doing More With Less (+Responsibility Leader)

Manager, Corporate Risk & Insurance, Daimler Trucks North America

When all risk management responsibilities landed on his sole shoulders, Dan Holden found a way to make it work, and saved his truck manufacturing company millions at the same time.
Chris Chathams and Letitia Estrada: Team Tackles Timber Safety Gaps (+Responsibility Leaders)

Chris Chathams, Safety Resource Director, TPMA

Latitia Estrada, Human Resource Generalist and Grant Coordinator, TPMA

The timber industry is inherently dangerous, but Chris Chathams and Letitia Estrada found a way to get funding and designed safety programs to make it safer.

Michael Gross: Ending Unnecessary Accidents

National Safety Director, Convergint Technologies

Stopping distracted driving meant establishing clear and actionable guidelines for disciplinary action when such events occurred.

Tim Davidson: No Injured Worker Left Behind

Assistant Vice President of Loss Prevention, Corporate Safety and Security Officer, IASIS Healthcare

By overhauling his company’s return-to-work program, Tim Davidson made it virtually impossible for an injured worker to fall through the cracks.

Dr. Frank Tomecek: Reducing Patient and Workers’ Comp Pain

Neurosurgeon, Oklahoma Spine & Brain Institute

By using electrodiagnostic functional assessments to collect more data on muscle and nerve function, Dr. Frank Tomecek is reducing unnecessary surgery.

Richard Pcihoda: Crisis Management Coordination (+Responsibility Leader)

Director of Risk Management, PREIT Services LLC

By his actions both before and after Hurricane Sandy, Richard Pcihoda successfully mitigated the damaging impact of Superstorm Sandy.

Elizabeth Ruff: Simply Peerless

Human Resources Generalist, Peerless Industrial Group

Elizabeth Ruff has developed a reputation as a “difference-maker.” It began with wrestling an unruly lost-time culture to the ground.

Patty Hostine: Vocal Rehabilitation Success (+Responsibility Leader)

Manager, Workers’ Compensation, Cooper Standard Automotive

Taking cues from her vocational rehabilitation background, Patty Hostine kept injured workers on the job and kept the company from drowning in claims costs.

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350px_allstarRisk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, perseverance and/or passion.

Responsibility Leaders overcome obstacles by doing the right thing over the easy thing to find  practical solutions that benefit their co-workers and community.

Alternative Energy

A Shift in the Wind

As warranties run out on wind turbines, underwriters gain insight into their long-term costs.
By: | September 12, 2017 • 6 min read

Wind energy is all grown up. It is no longer an alternative, but in some wholesale markets has set the incremental cost of generation.

As the industry has grown, turbine towers have as well. And as the older ones roll out of their warranty periods, there are more claims.

This is a bit of a pinch in a soft market, but it gives underwriters new insight into performance over time — insight not available while manufacturers were repairing or replacing components.

Charles Long, area SVP, renewable energy, Arthur J. Gallagher

“There is a lot of capacity in the wind market,” said Charles Long, area senior vice president for renewable energy at broker Arthur J. Gallagher.

“The segment is still very soft. What we are not seeing is any major change in forms from the major underwriters. They still have 280-page forms. The specialty underwriters have a 48-page form. The larger carriers need to get away from a standard form with multiple endorsements and move to a form designed for wind, or solar, or storage. It is starting to become apparent to the clients that the firms have not kept up with construction or operations,” at renewable energy facilities, he said.

Third-party liability also remains competitive, Long noted.

“The traditional markets are doing liability very well. There are opportunities for us to market to multiple carriers. There is a lot of generation out there, but the bulk of the writing is by a handful of insurers.”

Broadly the market is “still softish,” said Jatin Sharma, head of business development for specialty underwriter G-Cube.

“There has been an increase in some distressed areas, but there has also been some regional firming. Our focus is very much on the technical underwriting. We are also emphasizing standardization, clean contracts. That extends to business interruption, marine transit, and other covers.”

The Blade Problem

“Gear-box maintenance has been a significant issue for a long time, and now with bigger and bigger blades, leading-edge erosion has become a big topic,” said Sharma. “Others include cracking and lightning and even catastrophic blade loss.”

Long, at Gallagher, noted that operationally, gear boxes have been getting significantly better. “Now it is blades that have become a concern,” he said. “Problems include cracking, fraying, splitting.

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“In response, operators are using more sophisticated inspection techniques, including flying drones. Those reduce the amount of climbing necessary, reducing risk to personnel as well.”

Underwriters certainly like that, and it is a huge cost saver to the owners, however, “we are not yet seeing that credited in the underwriting,” said Long.

He added that insurance is playing an important role in the development of renewable energy beyond the traditional property, casualty, and liability coverages.

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine. Weather risk coverage can be done in multiple ways, or there can be an actual put, up to a fixed portion of capacity, plus or minus 20 percent, like a collar; a straight over/under.”

As useful as those financial instruments are, the first priority is to get power into the grid. And for that, Long anticipates “aggressive forward moves around storage. Spikes into the system are not good. Grid storage is not just a way of providing power when the wind is not blowing; it also acts as a shock absorber for times when the wind blows too hard. There are ebbs and flows in wind and solar so we really need that surge capacity.”

Long noted that there are some companies that are storage only.

“That is really what the utilities are seeking. The storage company becomes, in effect, just another generator. It has its own [power purchase agreement] and its own interconnect.”

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine.”  —Charles Long, area senior vice president for renewable energy, Arthur J. Gallagher

Another trend is co-location, with wind and solar, as well as grid-storage or auxiliary generation, on the same site.

“Investors like it because it boosts internal rates of return on the equity side,” said Sharma. “But while it increases revenue, it also increases exposure. … You may have a $400 million wind farm, plus a $150 million solar array on the same substation.”

In the beginning, wind turbines did not generate much power, explained Rob Battenfield, senior vice president and head of downstream at JLT Specialty USA.

“As turbines developed, they got higher and higher, with bigger blades. They became more economically viable. There are still subsidies, and at present those subsidies drive the investment decisions.”

For example, some non-tax paying utilities are not eligible for the tax credits, so they don’t invest in new wind power. But once smaller companies or private investors have made use of the credits, the big utilities are likely to provide a ready secondary market for the builders to recoup their capital.

That structure also affects insurance. More PPAs mandate grid storage for intermittent generators such as wind and solar. State of the art for such storage is lithium-ion batteries, which have been prone to fires if damaged or if they malfunction.

“Grid storage is getting larger,” said Battenfield. “If you have variable generation you need to balance that. Most underwriters insure generation and storage together. Project leaders may need to have that because of non-recourse debt financing. On the other side, insurers may be syndicating the battery risk, but to the insured it is all together.”

“Grid storage is getting larger. If you have variable generation you need to balance that.” — Rob Battenfield, senior vice president, head of downstream, JLT Specialty USA

There has also been a mechanical and maintenance evolution along the way. “The early-generation short turbines were throwing gears all the time,” said Battenfield.

But now, he said, with fewer manufacturers in play, “the blades, gears, nacelles, and generators are much more mechanically sound and much more standardized. Carriers are more willing to write that risk.”

There is also more operational and maintenance data now as warranties roll off. Battenfield suggested that the door started to open on that data three or four years ago, but it won’t stay open forever.

“When the equipment was under warranty, it would just be repaired or replaced by the manufacturer,” he said.

“Now there’s more equipment out of warranty, there are more claims. However, if the big utilities start to aggregate wind farms, claims are likely to drop again. That is because the utilities have large retentions, often about $5 million. Claims and premiums are likely to go down for wind equipment.”

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Repair costs are also dropping, said Battenfield.

“An out-of-warranty blade set replacement can cost $300,000. But if it is repairable by a third party, it could cost as little as $30,000 to have a specialist in fiberglass do it in a few days.”

As that approach becomes more prevalent, business interruption (BI) coverage comes to the fore. Battenfield stressed that it is important for owners to understand their PPA obligations, as well as BI triggers and waiting periods.

“The BI challenge can be bigger than the property loss,” said Battenfield. “It is important that coverage dovetails into the operator’s contractual obligations.” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at riskletters@lrp.com.