A Partner to Weather All Storms
Beecher Carlson’s Susan Garrard supported a client through a complex transaction involving the purchase of a lease interest in a portfolio of power projects from a bankrupt company.
“A material chunk of the portfolio is in a part of the country seriously affected by the hurricanes this year,” explained the client’s managing director, “so we have been trying to close deals over multiple potential claims.”
In some cases, the extent of damage remained unclear for a while. The company needed to ensure that new insurance would be available once the transaction closed.
“Susan has been creative, helpful and patient while dealing with these significant challenges on a portfolio that is very important to us,” said the managing director.
Garrard’s approach to carriers was that they were already on the risk and had an opportunity to recoup some premium. The lead carrier declined, but Garrard persisted down the list and found one carrier that concurred.
“Susan has been a fantastic partner,” said the founder of another client company. “She, and her colleagues, helped me manage through purchasing a large property and liability insurance policy for a portfolio of solar projects last year, and then renewing that policy this year.
“With their help she managed the barrage of questions associated with my financing. They were actually more helpful than my internal insurance department at my last company. I could not have navigated the insurance buying process without her.”
A Precedent for Success
“Geraldine has revamped how we have developed our wind projects [internationally] and set an incredible precedent,” said the director of insurance and risk management for a client of Beecher Carlson’s Geraldine Kerrigan.
“We had been limited in the coverage [available] in the local market. We were faced with subpar service and limited options.
“Geraldine was able to provide multiple options for our projects to manage our exposures at a significant advantage. We completed our first construction close using one of Geraldine’s designs and have set an effective precedent and model for our future projects in the region.”
That model was wholeheartedly accepted by the company’s headquarters as well as local offices, “which is a really big deal,” said the client.
There were more than a few variables in the equation. The revamped program would have to meet the approval of local partners and contractors, as well as lenders and management at the client in the U.S.
For example, that meant looking beyond usual markets for catastrophe coverage that would be placed internationally but meet local requirements in places where wind energy is still relatively new.
Kerrigan was able to engage a major European underwriter that also had a presence in the region where the client had operations. The result was an English policy form with limits and deductibles that were in line with the client’s existing worldwide program as well as compliant with all local regulations.
The Know-How to Get It Done
Renewable energy is no longer considered “alternative,” with wind and solar setting the cost basis in some wholesale markets. The complexity of transactions has evolved as well.
“This year we sold a large renewable facility,” said the VP of finance for a client of Beecher Carlson’s Mary Leighton.
“It was our largest transaction to date, and Mary led the way through the transaction for our program and working with the buyer as well.” Mary’s leadership helped ensure the process went smoothly, said the VP.
The client praises Leighton for supporting most of the firm’s activities, including refinancing another large operation and doing advance work for expansion into Asia.
“Mary really took on the tax equity structure in the refi. She made sure that the risk was balanced on both sides. Lenders always ask for the world and she was instrumental in bringing a realistic business approach to the risk.”
Another client operates a waste-to-energy facility. Insurance costs were rising every year, and still renewals were difficult. When Leighton took on the business, she had her work cut out for her.
Leighton updated and streamlined the program, focusing on gaps but also on inefficiencies and excesses. That set the stage for an aggressive campaign to put the client in front of new markets. Leighton was able to pare the casualty program to the essentials. Liability costs were cut by almost a third.
Getting Ahead of Hurricane Claims
With named storms wreaking havoc in 2017, some brokers impressed clients with their expertise in handling claims or even completing renewals or placements while claims were still open.
But for one client of Willis Towers Watson’s Michael Perron, the broker’s most impressive feat was what did not happen as the result of the year’s big storms.
“We did have some potential claims,” said the company’s international risk manager, “but importantly some of the loss-control that was put in place before the storm may have prevented major losses.
“This was a major win. I am a former property insurance broker, and based on that experience, I can say that Mike was very tactical in what he put together for us.”
The key was a detailed review of several policy sublimits. Perron specified certain ones to increase, including service interruption, doubling that. So when a hurricane left the area without power for a protracted period, the higher service interruption limit could not have been more timely.
Another client, a solar-panel developer, needed clarity on their third-party liability exposure for panels installed on residential properties. The client’s counterparties were seeking coverage that the client thought was excessive.
Perron worked with underwriters for the client as well as for the counterparties to quantify both the liability and property risks. In the end, the client purchased a limit higher than what had originally given them pause, but that decision was driven by hard data.
An Objective Expert
“Marc Toy was able to help me navigate the correct decision in purchasing non-standard insurance,” said the VP of project finance at one of Toy’s clients, a solar developer.
“We use third-party tax equity in our capital structure. One tax-equity investor wanted us to provide a certain level of production insurance for the first few years. That is not standard.
“We were choosing between an established firm offering this coverage and a new entrant. Marc walked me through the policy for each and presented the pluses and minuses. He did not promote either option, even though going one direction was in his favor. Marc just provided clear and objective analysis of both policies.”
Insurance to support the viability of a portfolio of solar projects — and to backstop the revenue stream in the event of an energy shortfall event — is gaining traction in the sector. As yet, there are just a few carriers offering it, so brokers have a challenge taking this risk to market.
“We have an extremely complicated international company structure,” said the director of insurance and risk management at another client. “Marc was instrumental in ensuring our risk exposures, public and private, were adequately addressed.
“Throughout numerous company evolutions this year, he has been able to mitigate any detrimental effects to our worldwide master liability coverage while obtaining extremely competitive rates to our programs.”
The Innovation to Win
A client of Marsh’s James Wagner had a joint-venture wind farm that was approaching the end of original equipment manufacturers (OEM) warranty. The warranty included maintenance on site.
“We knew we needed to be competitive in the bid process to perform the maintenance ourselves and compete against the OEM’s bid, which was a full wrap with one price for service and labor,” said the risk manager for the client. The company needed a way to provide the confidence of a full wrap to the board.
“Jim listened and concluded that we needed ‘financial smoothing.’ This type of coverage did not exist, but he brought the concept to a specialty underwriter and together they were able to create ‘cost cap’ coverage. Using that, we won the bid.”
The cost cap is essentially a layer of coverage that sits above the annual maintenance to provide protection against inaccurate projections of maintenance costs.
Since the placement was such a success, the client has placed it for several other farms that had also fallen off warranty. Those multiple placements allow the company to proceed with other business ventures.
Also, the client’s all-risk property carrier has since lowered its rates on the wind farms with the new warranty in place.
“Jim has helped to create a world-class property program for us,” said another client. “He worked tirelessly to make sure all the pieces aligned and the program we implemented was solid and yields the savings we projected to the shareholders.”