Nuclear power is complicated enough, but nuclear waste handling and processing is even more fraught — from public policy to insurance policy.
As the nuclear industry shows some signs of growth after years of dormancy, more opportunities are opening for processors and other service companies. But to take advantage, those firms need to be able to secure or modify coverage quickly. It is a market with few competitors, but also one that makes underwriters highly circumspect.
“We have a very significant and complicated insurance risk transfer program,” in the multimillion-dollar range, said the insurance manager for one service firm. “Neil is a highly trusted and respected colleague to our senior management team and he proved his professionalism and value throughout the course of 2013.
“For example, we had a multimillion-dollar project that could have been at risk, but the skillful, hands-on management of the relationship between Mr. Cayabyab and his team, local management, and the carrier resulted in the project moving forward successfully. I dare say that this likely would not have been the case without him.”
Another client is a nuclear power generator. The plant suffered a long idle period because of the failure of a key component. The client said that Cayabyab was involved in every aspect of the shutdown, especially handling claims with the property carrier. In particular, Cayabyab found a way to save the utility nearly a quarter-million dollars in liability protection.
Capable and Knowledgeable
For clients of Brendan Quinlan, his knowledge is power.
“I worked with Brendan over the last two years to create, structure, draft and place a policy which backstops project level
debt for a power-generation project,” said the director of the development.
“The insurance policy was designed to make project lenders whole in the event the facility does not operate at warranty levels and the developer is insolvent. Brendan’s extensive knowledge of the insurance market coupled with his strong financial acumen — critical to understanding how lenders approach the project policy — were fundamental to the ultimate success of the project,” the director said.
“Brendan identified the players in the marketplace who had the knowledge and capabilities to craft a customized policy to meet the business requirements and objectives of all the parties involved.”
Another client of Quinlan’s is a power generator and distributor with conventional and renewable energy operations.
“We have grown a great deal, and we had to make changes to our policies to make the work we do in the field more palatable to our underwriters,” said the treasurer. “We’ve got people on roofs all over our region and that was beyond what some of our original carriers were down for. The rapid growth of our company has meant our bonding obligations are constantly changing. Brendan worked very hard this past year to keep all of that current and compliant.”
Persistent and Precise
The adage, “don’t let perfect be the enemy of good,” always leaves open the question of when and how to fix whatever was papered over the first time around.
“We purchased another utility several years ago, and that transaction came with big differences in property valuation between our numbers and the underwriter’s numbers,” said the utility’s senior director of corporate risk and insurance.
“We wanted to roll the subsidiary into our main property program, but we had this outstanding unresolved issue of a very large, insurable value increase. We knew the resolution of the issue would result in a substantial premium increase, which would pressure an already strained budget. Bob developed a strategy to implement the expected premium increase over two renewals.”
The risk director said that it was a long and complex negotiation the first time around that required Sweeney, a vice president at Marsh, to dig into the assets and operations in question, but also the terms of the acquisition and both of the existing programs.
“All of that only led to a tentative agreement with a lot to be made final,” the client said. “It was more of an agreement in principle than a firm resolution. Bob had to come back and cement the deal.
“He could have just asked for a final sign-off, but instead he went back over everything a second time and actually found more stuff to strengthen our case.”
Efficient and Effective
Thanks to rapid changes in the energy industry, from the domestic oil and gas bonanza to developments in alternative energy, some of the biggest names in the utility sector are growing quickly in areas that they would not have dreamed about five years ago. Bowring Marsh’s Andrew Moulder is greatly aiding that growth.
“Andrew understands and has earned the respect of the Bermuda insurance markets, enabling him to most efficiently and effectively find and align capacity for the unique aspects of a given power and utility risk,” said one insurance manager.
“His knowledge of each Bermuda market’s risk appetite enabled us to maintain hundreds of millions of dollars of excess liability capacity through the hardening market following the recession, offshore oil-rig claims, California wildfire claims, and gas explosion claims without significant premium increases, or losing coverage terms.” Much of that was in areas where a traditional utility would not previously have needed placement.
Another big utility client added, “Andrew worked with our 70-year-old company’s initial entry into the insurance marketplace, which, itself, was a unique and challenging experience.
“Then he has continued to work with our company following a large loss, which added to the challenges of placing coverage for a company new to the insurance markets.”
Throughout all of these placements, the client said, Moulder manages things with a quiet, unassuming style, banking on his relationships and industry knowledge.
If there is a theme to this year’s awards in the energy, utility and related industrial sectors, it is underwriters changing, reducing or ending their participation in certain sectors, leaving brokers and their clients scrambling to replace capacity and trying to integrate new carriers and their practices into the programs.
Those carrier recalculations affect insureds of every size, including the largest international utility operating companies. Those firms said the size of their programs made adjustments more difficult than for smaller owners.
For one major power operator, the withdrawal of a significant workers’ compensation carrier left very few places the client could turn to replace the capacity. The client credited Rivera, senior vice president at Marsh, with an aggressive marketing campaign that even included underwriters that had been unwilling to participate in the past.
“The incumbent market indicated that the premium would increase substantially due to a new rating model,” said the insurance analyst for the utility. Rivera marketed the program and other markets provided a competitive quote comparable to the existing policy once they became comfortable with the insured’s exposures. “Quetzy not only was able to maintain expiring premiums, but she was also able to satisfy our budgetary constraints despite the hardening excess workers’ comp market,” the analyst said.
Beyond that specific placement, Rivera also marketed a number of the client’s additional lines at competitive rates.
Unlike attorneys, insurance brokers are not asked to do any pro bono work; indeed non-billable time is avoided whenever possible. That said, the nature of brokerage work, especially with potential clients, is in some ways betting on the come. Sometimes the payoff is not financial, but goodwill.
The Battelle Energy Alliance, based in Idaho Falls, Idaho, is a subsidiary of the Battelle Memorial Institute. It operates nuclear reactors, but is not a utility and therefore not eligible for coverage by the power industry mutual, Nuclear Electric Insurance Ltd.
“We were covered under a Department of Energy program that just went away,” said Linda Montgomery, general counsel for the Alliance.
Typically, Marsh’s renewal discussions begin five or six months before the renewal date, but this situation arose with slightly more than two months to go. To complicate matters, the placement involved general liability, workers’ compensation and automobile liability coverage for multiple nuclear and non-nuclear exposures, ranging from security personnel authorized to use deadly force, three active on-site nuclear reactors, and more than 4,000 employees spread over 900 square miles of Idaho desert.
“We needed to scramble for coverage,” Montgomery said. “We went to Gina in a panic and she was able to get us quotes over the phone very quickly. It was extraordinary, really phenomenal what she was able to accomplish.” In the end, the Alliance went with a state program, but Montgomery plans to give Eugina Visor other business.