2018 Power Broker

Utilities

Knowing Every Option

Jonathan Ball
Managing Director
Marsh, New York

2017 was noteworthy for one of Jonathan Ball’s clients because it went through a sizable merger.

“One of the most sensitive parts of the integration was merging the insurance programs for both companies — especially the casualty programs,” said the risk manager.

“Jon led the team that integrated the casualty programs. He was instrumental in setting the tone with the carriers and setting expectations with us. We were able to negotiate terms and pricing that were acceptable to both sides. Without Jon’s insights into the markets, the industry and our organization, this would have been difficult.”

Showing strong perspicacity, Ball was not only a heavy hitter for big clients, but he was also lauded by two new risk managers for his delicate touch.

“I am new as a manager of risk and insurance,” said another client. “My first renewal was with Jon on our primary casualty and excess liability tower. I was specifically hired to work a new captive into my first renewal.

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“To make things even more tricky, the captive only gained formal authority to operate roughly four days before the renewal. So we actually had two separate bindable options, one with the captive and one without.”

Another new risk manager had a similar accolade: “Jon worked diligently to assist us in lowering our excess casualty premium this year — sounds easy, but it’s not.

“Jon introduced me to key underwriters, including management. Internally, he participated in two presentations to our legal department. Our attorneys truly appreciated his insights.”

Running Full Speed

Josh Collier, CPCU, AIC
Senior Consultant
Aon, Boston

“There is never a good time for a hurricane,” said the director of risk and insurance for one client, “but this year we had three just before the end of the fiscal year. We had to determine our deductibles and our recoverables to close the books. Josh was instrumental in making this happen.”

It was a sprint to the finish, but other events also occurred.

“We had a fire of a particular size that could have meant a loss just above or below the deductible. We included Josh on the calls with our finance team, and he helped make the determination.”

Work for another client was a marathon, not a sprint.

“Prior to working with Josh, most of our property claims were open for nine to 12 months, and we had dozens of claims open,” said the insurance manager at one client.

“Since Josh took over, most claims are resolved within three months, and we are down from a couple dozen claims outstanding to fewer than five within the last year. Josh consistently sets the bar extremely high for all property claim brokers. His ability to succinctly break down complex coverage language is exceptional.”

Collier reworked the loss runs to establish accountability of the stakeholders and negotiated several contentious claims with technical coverage issues. Several of the technical claims were negotiated with global settlements after months of contentious discussions with no progress.

Never in the Dark

Brian DeBruin, CPCU, CRIS, ARM
Managing Director
Aon, New York

For many years the North American electricity market has slowly worked toward increased reliability. While infrastructure improvements have been made, the biggest changes are financial.

“In the last year since working with Brian, we have purchased two unique outage insurance coverages, capacity performance and heat-rate call option,” said the senior insurance manager at one of DeBruin’s client companies.

“I recall working with other brokers to understand what these things were and risks associated with our decision to purchase this, but no broker that I spoke with could truly explain them well. Brian takes the time to understand our company, what our risk appetite is, provides options and explains the pros and cons of each option.”

The wholesale electricity market, where another client sells power, increased the level of non-performance charges. Those charges would be assessed on any power provider if their generating facilities were not available to provide power during electricity market-declared emergencies.

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The penalties can be significant, ranging into the millions of dollars.

“I would like to commend Brian. He helped us place specialized coverage called capacity performance insurance for one of our assets,” said the insurance buyer at a third client.

“Brian was [invaluable] in helping us understand the coverage, making sure it met our needs, soliciting a competitive suite of quotes, and helping us negotiate the placement.”

Engineering Success

John Katilus
Senior Vice President
Marsh, Boston

Sometimes brokers win their laurels and underscore their independence by not selling insurance.

“John’s engineering background enhances his skills as a broker and is helpful as our underwriter is also an engineer,” said the senior director of risk management at one client.

“John is an expert, but what makes him great is his attention to detail and deep understanding of property insurance. Recently we discussed the value of a small limit of California earthquake coverage to trigger a property policy for ensuing fire and flood and if there was any value in this approach.

“After multiple conversations, we were able to conclude that we do not need that coverage and buying even a small amount of coverage with such large deductibles would not benefit our organization.”

Which is not to say that Katilus is not a closer. Quite the contrary: “John orchestrates the research, market approach and course corrections in pursuit of the best overall insurance program for our asset, customized among various underwriters to our satisfaction,” said the senior director of another client.

“This was accomplished for the renewal of our insurance program. We had experienced failures and claims from several transmission projects. John was able to engage with us proactively around our current requirements and future insurance strategies and went above and beyond to get things done for our account.”

Sticking to Tradition

Rob Logan, CPCU, CRIS
Vice President
Aon, Dallas

Rob Logan is a Power Broker® to traditional power companies. With deregulation, disintermediation and competitive wholesale markets, old-school “wires only” utilities have become a rarity. And while such operations were viewed as safe and stable businesses for decades, now they are out of fashion, heavy with legacy assets and limited growth.

“Our casualty program, while not having a great long-term claim history, has had a number of good years with no claims,” said a risk manager of one client.

“During the renewal process, a potential major claim came about and very much threw the renewal into a pricing spiral.

“It took a final-days, face-to-face meeting with the underwriter to come to a reasonable premium renewal with the expectation that if the aforementioned claim had any potential, premium expectations would rise on the results of that claim, not the expectations. Rob knocked them back on presuming us guilty in the claim.”

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Such an intervention would have been enough for the risk manager to recommend Logan, but he added, “Rob stepped up to clean up a new property policy form. The policy has some electrical generation pieces that, while not directly applicable to our company, could have caused issues on a similar claim.

“Rob probably could have spent his time on a more valuable proposition with another client but, to me, did the right thing in getting our form, with some other resources he pulled in straight for our needs.”

Top Performer

Tom Markovic
Senior Vice President
Marsh, New York

The emerging risk across the utility sector is performance penalties for when electricity has been contractually offered but cannot be delivered. Under new power-purchase agreements with the regional wholesale markets, those penalties can range into the millions.

“Tom is my broker for power-plant outage insurance and also for capacity performance-penalty coverage,” said the director of risk for one client.

“Both types of coverage require customized policy writing and negotiations. Tom kept us current with the changes in the marketplace and has helped us discover new insurance companies willing to participate in our risk exposure. That resulted in efficient pricing.”

Another client owns several generating companies. Risk transfer for performance penalties is an essential part of project planning and finance.

“We took on a project under construction,” said the CFO. “We had to provide all the support to get the project commercial, as well as handle all the insurance.”

The shortage-event penalties were a risk the client could not handle on its own.

“Tom was able to develop coverage that was manuscripted for our unique situation. He was originally our broker for builders’ risk and general liability, and he created the coverage for our performance penalties and was able to place it.

“We can self-insure for the small risks, but we could not shed our bilateral obligation to the wholesale market. The work that Tom did really stood out, especially his leadership on addressing this risk.”

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The R&I Editorial Team can be reached at [email protected]