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Senior Account Executive
Aon, Dallas

Working With the Art of Persuasion

Some alternative energy projects are completely new and different, like a solar array, and some are merely upgrades and enhancements to existing operations that make them more efficient.

Rob Battenfield, senior account executive with Aon Risk Solutions in Dallas, was lauded by clients for handling big placements on both ends of that spectrum in 2012. Because of the nature of green energy, owners involved in such projects often execute them under the auspices of a joint venture, subsidiary or other separate entity. That makes for complex insurance placements, underwriting and renewal.

In one case a client was planning to upgrade a power-generating facility with new low-emissions, high-efficiency equipment, but the company had a difficult time finding underwriters willing to participate. "We had a new facility and a new operating entity and none of our existing carriers wanted to write," the client said. "So we also needed all new markets. Within just days Rob had brought in new carriers, and also worked with some of our existing underwriters to write some of the business. He anticipated every one of their concerns and was able to address every one of them."

The challenges for solar companies were securing long-term guarantees necessary for customers and the insurance backing those guarantees. The risk manager credited Battenfield with convincing carriers that the insured did not have to purchase extensive and expensive additional coverages to support the warranties on its goods. Once the underwriters were on board, it was then possible for the client to secure financing for its project.

Managing Director
Aon, Houston

A Mix and a Match

Brokers often earn their stripes bringing new underwriters to a program, but in 2012, Tim Hanlon, managing director with Aon Risk Solutions in Houston, earned laurels bringing a new company to the market. "We are a small company in Europe but we were new to the U.S.," the client said. "Tim was able to present us to the carriers, and present our program in a way that made them feel very comfortable with our exposures. He really took a proprietary interest in the placement."

In particular, the client said that Hanlon was able to mix and match, using the company's existing exposures and record in Europe selectively where it would be beneficial to the new underwriters in the United States.

Innovative placement was the theme for Hanlon in 2012, even for existing clients. "Our premiums had gone up dramatically in recent years and we were planning to increase our retentions to try to reduce that cost," said a risk manager for a major energy services provider. Instead, the client said, "Tim was able to bring new options to our existing program, including some high-capacity carriers. He really brought a great deal of creativity to the placement. We did not realize the savings that we could achieve without increasing our retentions."

In another case, a client needed to provide high delay-in-start limits for a large construction project, as demanded by a lender. The solution was to seek more capacity from alternative risk markets. The key, the client explains, was to compartmentalize the exposure in such a way that the alternative markets could accept the risk transfer.

Managing Principal
PowerGuard Specialty Insurance Services, Irvine, Calif.

Pumping Light Into Solar Coverage

The year 2012 was a breakout year for alternative and renewable energy, rebounding from the debacle of the Solyndra bankruptcy in September 2011. And while there were no big headlines in 2012, there were important enabling advances in risk management that set a firm ground for essential financing. The singular challenge in solar energy is that manufacturers must guarantee the durability of panels for 25 years.

With most manufacturers being pure-play companies based in China, "American power companies need to know there is someone backstopping those warranties," one risk manager said. "What Mike did for us this year is to explain to the market the bankability of our operations. That made our project financing possible."

"We needed an insurance program in place to give lenders peace of mind concerning any production defects and the risk of massive returns," another client said. "Mike basically created this coverage, and went to the market with it. There was no existing program or policy out there. The solar business was stagnant because of the difficulty in getting that coverage."

Clients credit McMullen, managing principal at PowerGuard Specialty Insurance Services, with setting "an industry standard" in the way it presented the risk to the market, and in the way it divided the exposures to multiple carriers. "This was very far from simply transactional brokerage," said one solar industry executive. "We had to place this business and we have had to maintain constant contact with our carriers and our lenders. Mike has done all of that."

Managing Director
Aon, Dallas

Benefiting From the Light of Experience

While several brokers in the energy category won recognition for their work in establishing the bankability of alternative energy, Marshall Nadel, managing director and practice leader for Aon Risk Solutions and a former officer with the U.S. Navy Reserve, went even further.

"He put together an entire risk workshop that included the management team, the project team and the delivery team, all the players around a table and on a walk-through" the client said. "Most importantly, he explained to management and to lenders that insurance is not a dirty little word. Insurance is an extremely useful and flexible risk management tool that should be embraced."

The client said that some at the table were advocating noninsurance solutions to the financing challenge to this particular project. "Marshall brought to light the risks of noninsurance solutions relative to the overall project," said the risk manager.

In a small irony, just as one client was praising the flexibility of insurance solutions, another of Nadel's clients lauded him for coming to the rescue when underwriters got prickly.

One insurance buyer whose company was retrofitting and expanding a facility with more reliable and efficient equipment recalled when he and his team were suddenly met with skepticism by the underwriters for relying on "unproven technology."

The underwriters refused to take on the risk without big new premiums and term restrictions.

"Marshall got right on it and got the underwriters comfortable with what we were doing," the buyer said.

Senior Vice President
Willis, New York

Making the Most of Difficult Renewals

For one risk manager, 2012 renewals were a challenge. Even though the company didn't encounter any losses, losses paid in the entire sector were putting upward pressure on rates.

"Property insurers were insistent on requiring 10 percent rate increase on top of 10 percent values increase, even though our company did not encounter any losses in the current policy term," the risk manager said.

Perron, senior vice president and assistant practice leader with Willis of New York Inc., saved the company money by getting carriers to agree to a short-term policy, the manager said. That meant the rate increase would only apply for 10 months, rather than 12 months, and Perron urged carriers to share engineering costs, which had previously been charged to the company as a separate fee, the manager said.

Another client did incur losses. "We have had a very difficult year with respect to several casualties and losses suffered by facilities owned/operated by our company," the client said.

Perron and his team "rose to the challenge and arranged the required renewals," the client said. In another case, one underwriter decided to withdraw from the program, possibly due to concerns about the insured's physical plant. "Mike alerted us to this concern, so we could properly address the issue at our annual underwriting meeting," the client said. Perron explained to carriers how this client was addressing their physical property through proper site maintenance practices, the client said.

Carriers ended up increasing participation on the risk.

Senior Vice President
Aon, Houston

Broker Brings Clients up to Speed

The multiple risks and layered exposures of energy services are already enough to make many underwriters skittish, and so the question of how to handle service-company customers as added insureds is always fraught.

One client had an explicit policy of never carrying customers as added insured, but found that over time, that position was becoming out of step with industry norms. "Kevin was instrumental in working with our board of directors and senior management to review the additional insured policy, and get them comfortable with the idea," said one risk manager, in reference to Sisk, senior vice president for Aon Risk Solutions in Houston.

The risk manager's company will now consider carrying a customer as an added insured on a case-by-case basis, and the change in strategy has made the company more focused and competitive, the risk manager said.

"Our previous policy was costing us business, and now we have a definitive, if restrictive process for evaluating customers as added insured," the risk manager also said. "Kevin worked with our carriers and with our management. The practice is still frowned on, but at least the door is open a little. It might not seem like a big change from the outside, but from within it is huge."

Another provider of exploration and production, transportation and processing services to contract drillers believed one of its carriers was being difficult in connection with a claim, which was in danger of becoming a serious problem as a result. Sisk was asked to intervene. In short order, the claim was resolved and the payment greater than originally anticipated.