2018 Power Broker

Renewable Energy

A Partner to Weather All Storms

Susan Garrard, AIS, AINS
Managing Director
Beecher Carlson, Boston

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.

Advertisement




“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 Kerrigan
Executive Managing Director
Beecher Carlson, Boston

“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

Mary Leighton
Senior Vice President
Beecher Carlson, Boston

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.”

Advertisement




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

Michael Perron, ARM, P.E.
Power Generation Practice Leader
Willis Towers Watson, New York

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
Senior Vice President
Beecher Carlson, Seattle

“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.

Advertisement




“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

James Wagner, CPCU, CIC
Senior Vice President
Marsh, Charlotte, N.C.

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.”

More from Risk & Insurance

More from Risk & Insurance

High Net Worth

High Net Worth Clients Live in CAT Zones. Here’s What Their Resiliency Plan Should Include

Having a resiliency plan and practicing it can make all the difference in a disaster.
By: | September 14, 2018 • 7 min read

Packed with state-of-the-art electronics, priceless collections and high-end furnishings, and situated in scenic, often remote locations, the dwellings of high net worth individuals and families pose particular challenges when it comes to disaster resiliency. But help is on the way.

Advertisement




Armed with loss data, innovative new programs, technological advances, and a growing army of niche service-providers aimed at addressing an astonishingly diverse set of risks, insurers are increasingly determined to not just insure against their high net worth clients’ losses, but to prevent them.

Insurers have long been proactive in risk mitigation, but increasingly, after the recent surge in wildfire and storm losses, insureds are now, too.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy,” said Laura Sherman, founding partner at Baldwin Krystyn Sherman Partners.

And especially in the high net worth space, preventing that loss is vastly preferable to a payout, for insurers and insureds alike.

“If insurers can preserve even one house that’s 10 or 20 or 40 million dollars … whatever they have spent in a year is money well spent. Plus they’ve saved this important asset for the client,” said Bruce Gendelman, chairman and founder Bruce Gendelman Insurance Services.

High Net Worth Vulnerabilities

Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

As the number and size of luxury homes built in vulnerable areas has increased, so has the frequency and magnitude of extreme weather events, including hurricanes, harsh cold and winter storms, and wildfires.

“There is a growing desire to inhabit this riskier terrain,” said Jason Metzger, SVP Risk Management, PURE group of insurance companies. “In the western states alone, a little over a million homes are highly vulnerable to wildfires because of their proximity to forests that are fuller of fuel than they have been in years past.”

Such homes are often filled with expensive artwork and collections, from fine wine to rare books to couture to automobiles, each presenting unique challenges. The homes themselves present other vulnerabilities.

“Larger, more sophisticated homes are bristling with more technology than ever,” said Stephen Poux, SVP and head of Risk Management Services and Loss Prevention for AIG’s Private Client Group.

“A lightning strike can trash every electronic in the home.”

Niche Service Providers

A variety of niche service providers are stepping forward to help.

Secure facilities provide hurricane-proof, wildfire-proof off-site storage for artwork, antiques, and all manner of collectibles for seasonal or rotating storage, as well as ahead of impending disasters.

Other companies help manage such collections — a substantial challenge anytime, but especially during a crisis.

“Knowing where it is, is a huge part of mitigating the risk,” said Eric Kahan, founder of Collector Systems, a cloud-based collection management company that allows collectors to monitor their collections during loans to museums, transit between homes, or evacuation to secure storage.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy.” — Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

Insurers also employ specialists in-house. AIG employs four art curators who advise clients on how to protect and preserve their art collections.

Perhaps the best known and most striking example of this kind of direct insurer involvement are the fire teams insurers retain or employ to monitor fires and even spray retardant or water on threatened properties.

High-Level Service for High Net Worth

All high net worth carriers have programs that leverage expertise, loss data, and relationships with vendors to help clients avoid and recover from losses, employing the highest levels of customer service to accomplish this as unobtrusively as possible.

“What allows you to do your job best is when you develop that relationship with a client, where it’s the same people that are interacting with them on every front for their risk management,” said Steve Bitterman, chief risk services officer for Vault Insurance.

Site visits are an essential first step, allowing insurers to assess risks, make recommendations to reduce them, and establish plans in the event of a disaster.

“When you’re in a catastrophic situation, it’s high stress, time is of the essence, and people forget things,” said Sherman. “Having a written plan in place is paramount to success.”

Advertisement




Another important component is knowing who will execute that plan in homes that are often unoccupied.

Domestic staff may lack the knowledge or authority to protect the homeowner’s assets, and during a disaster may be distracted dealing with threats to their own homes and families. Adequate planning includes ensuring that whoever is responsible has the training and authority to execute the plan.

Evaluating New Technology

Insurers use technologies like GPS and satellite imagery to determine which homes are directly threatened by storms or wildfires. They also assess and vet technologies that can be implemented by homeowners, from impact glass to alarm and monitoring systems, to more obscure but potentially more important options.

AIG’s Poux recommends two types of vents that mitigate important, and unexpected risks.

“There’s a fantastic technology called Smart Vent, which allows water to flow in and out of the foundation,” Poux said. “… The weight of water outside a foundation can push a foundation wall in. If you equalize that water inside and out at the same level, you negate that.”

Another wildfire risk — embers getting sucked into the attic — is, according to Poux, “typically the greatest cause of the destruction of homes.” But, he said, “Special ember-resisting venting, like Brandguard Vents, can remove that exposure altogether.”

Building Smart

Many disaster resiliency technologies can be applied at any time, but often the cost is fractional if implemented during initial construction. AIG’s Smart Build is a free program for new or remodeled homes that evolved out of AIG’s construction insurance programs.

Previously available only to homes valued at $5 million and up, Smart Build recently expanded to include homes of $1 million and up. Roughly 100 homes are enrolled, with an average value of $13 million.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work.” — Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“We know what goes wrong in high net worth homes,” said Poux, citing AIG’s decades of loss data.

“We’re incenting our client and by proxy their builder, their architects and their broker, to give us a seat at the design table. … That enables us to help tweak the architectural plans in ways that are very easy to do with a pencil, as opposed to after a home is built.”

Poux cites a remote ranch property in Texas.

Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“The client was rebuilding a home but also installing new roads and grading and driveways. … The property was very far from the fire department and there wasn’t any available water on the property.”

Poux’s team was able to recommend underground water storage tanks, something that would have been prohibitively expensive after construction.

“But if the ground is open and you’ve got heavy equipment, it’s a relatively minor additional expense.”

Homes that graduate from the Smart Build program may be eligible for preferred pricing due to their added resilience, Poux said.

Recovery from Loss

A major component of disaster resiliency is still recovery from loss, and preparation is key to the prompt service expected by homeowners paying six- or seven-figure premiums.

Before Irma, PURE sent contact information for pre-assigned claim adjusters to insureds in the storm’s direct path.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work,” said Curt Goetsch, head of underwriting for Ironshore’s Private Client Group.

Advertisement




“If you’ve got custom construction or imported materials in your house, you’re not going to go down the street and just find somebody that can do that kind of work, or has those materials in stock.”

In the wake of disaster, even basic services can be scarce.

“Our claims and risk management departments have to work together in advance of the storm,” said Bitterman, “to have contractors and restoration companies and tarp and board services that are going to respond to our company’s clients, that will commit resources to us.”

And while local agents’ connections can be invaluable, Goetsch sees insurers taking more of that responsibility from the agent, to at least get the claim started.

“When there is a disaster, the agency’s staff may have to deal with personal losses,” Goetsch said. &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]