Rising trend of power industry insurance claims
Marsh says increased number of large claims pressures industry
A report by insurance broker Marsh has found a rising trend in the number of large insured claims against the global power industry since 2005. The research, based on the number of claims recorded on operational power accounts handled by Bowring Marsh’s London office, states that insurers have settled at least one claim exceeding US $25 million each year.
Since 2005, the incidents of large losses has continued to increase, with seven loses of over $25 million recorded in 2010, and four recorded through H1 of this year.
“Insurers are reconsidering their stance on pricing and conditions for the global power industry following sustained heavy losses arising from machinery breakdown, fire and explosion, natural perils and associated business interruption. Improving risk management techniques to reduce claims frequency and costs should be a business imperative for power organisations,” said Philippe Du Four, Marsh’s global power practice chairman.
The report – titled “The Impact of Large Losses in the Global Power Industry” – also suggests that more frequent and severe natural disasters and increasing equipment values have caused significant losses for power firms. Claims attributed to the failure of turbines, transformers and generators between 2001 and 2011 totaled $1.2 billion.
“If large claims continue to blight the power industry with the same frequency that has been observed over the past decade, insurers’ appetite for writing power business is likely to change. Many are already taking a much more rigorous approach to pricing these risks. This, in turn, could lead to a reduction in insurance capacity and market competition and, ultimately, rising premiums,” Du Four adds.