Neil Prior, Managing Director

Commercial in Confidence

Neil Prior, Managing Director

How is the insurance market adapting to new opportunities and challenges?


The Origin of SciemusSciemus was founded in 2002 to create a series of advanced risk analysis models across a variety of industries significantly improving the ability to quantify present and future performance and risk of underperformanceSciemus takes an engineering based approach to building models and targets development where, historically, there has been an over reliance on experiential judgment and inadequate analysisEach of our models are driven on the worlds largest normalised data sets using unique modelling capability. The models are independently accredited by leading consultancies and rating agencies

Commercial in Confidence 2


Sciemus PowerSciemus Power have been underwriting in Power since 2008 with various companiesNeil Prior 27 years in insuranceBroker with Marsh and JLT – Power Sector FocusPower Underwriter at ACE from 2007-2013Managing Director at Sciemus Power

Started to underwrite power business since September 2013 as an MGA on behalf of a select panel of Lloyd’s syndicates



Underwriting as a New EntrantPower Insurance highlights over the last 5-10 yearsValues doubling over 10 yearsDeductible and sub-limit stagnationRenewable energy increased market share Flexibility has overtaken efficiency in the value chainBusiness interruption profile changes Investment and maintenance revised emphasisAgeing assets

Results have shown a steady increase in attritional losses

Challenging time for Power Underwriters



Power Industry ChangesGrowing Renewable energy market share

General move from baseload to load balancing power generation

Shift away from long standing operational modes of ageing assets

Increased maintenance spend coupled with increased failure rates

Large increases in insured values ~100% in 10 years

5


Impact on Insurance

“The forced outage rate has increased over the last ten years even though maintenance has increased as well”

EURELECTRIC, Power Statistics & Trends 2011


Deductibles have less impact on claims

Increasing claims frequency

Greater uncertainty around BI numbers and claims

Plant Loss History less indicative of future risk


Responding to Industry ChangeThere is a need for insurers to move beyond Subjective Judgement

Experience and opinion must be balanced with robust statistical analysis

What tools do you need?DataAnalysis of past performancePredictive modelling

Encouraging data exchange between client and underwriter enables better informed decisions


Engineering know-howUnderwriting Discipline


Applying the Understanding of RiskLeveraging from a wider dataset allows the effect of operational changes to be forecast

Breaking down the plant into component parts maximises relevant data for analysis

Modelling takes into account significant risk drivers such as maintenance, spares, operating regime, technology, fuel and age

Policy specifics applied to the plant model, allows for a like-for-like comparison of changing values and deductibles

Underwriter benefits from specific loss distribution to better inform risk selection and pricing



Data PartnersStrategic Power Systems

The world’s leading collector of Power Station Reliability, Availability and Maintenance (RAM) data through ORAP®

Formerly National Gas Turbine Research Unit

Clients include major manufacturers and global operators

Knowledge repository of over 8,000 Power Plants and over 7000 generation unitsEvent data for more than 13000 years worth of operations


And Growing…


It all starts with the Data….Analysis and the data it utilises, needs to be maintained and kept current

Continually respond to changes in risk due to operational and technological shifts

Communicate the value of deductibles and allow operators to gain best valuethrough retention and transfer of risk


DATA

Operation Characteristics

Experience Based

Analysis

Predictive Modelling

Technical Underwriting

Relevant Retention

Setting

Improved Results &

Stability


A Concluding View

A new entrant will not survive if all it provides is cheap capacity in an already capital-rich marketplace

Performance Data is the most significant item of information in analysing the exposure in the power sector where >75% of all losses are as a result of machinery breakdown

Understanding and analysing this data and working with clients to set relevant retentions and fair premiums will be the simplest route to achieving market stability



….or in others words

Wouldn’t it be great for us all if we had

Security of insurance supply?


Documents

Neil Prior, Managing Director