- Severe hailstorms in late July caused extensive property damage across parts of Germany, making it the costliest hail event in the country's history. - Initial estimates indicate the storms will cost German insurers at least €600 million in claims, surpassing the €760 million paid out after major hailstorms in 1984. - SV Sparkassenversicherung, a leading property insurer in the affected region, increased its estimated losses from €100 million to €260 million and expects to pay out €13 million for damaged vehicles.

1. Germany faces €600m
insured loss from hailstorms
Global carriers strive for niche
Chinese foothold as international
investment soars
p2
alising on the potential
ar
r-
d
as
d-
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ng
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et
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es
ir
hnologyandthecatalystprovidedbytheUSFarmBillearlier
ncouragedthecreationofbiomassandgeothermalenergy
ver, it is important for insurers to gain an understanding
cial realities and other risks associated with these projects
anceday.com| Monday 5 August 2013
able way to produce power – some-
thingthatintimesofsuch austerity
isveryimportant.
In real terms that means geo-
thermal electricity generation, for
instance, comes in at between 4.5¢
to 7.5¢ per KW/hr. That is a pric
point that is competitive with
many fossil-fuelled facilities, with
the added advantage they do not
emit the carbon that comes with
thosefacilities.
Reliability of the technology is a
key factor, and for many years has
kept even the most ambitious
developers from investing. How-
ever, even this challenge is starting
tobeovercome.
Lifespan
Indeed,withmanygeothermaland
9www.insuranceday.com| Monday 5 August 2013
Case study: Germany’s renewable capacity
and energy generation
Germany has already committed to
generating 30% of its power from renew-
able energy by 2030 and 60% by 2050, while
continuing to phase out its reliance on
nuclear power completely over the next
nineyears.
Within Germany, biomass makes up 30%
ofthatrenewableenergymix.
76,017 MW
Total installed
capacity
21,200 GW/hr
Hydropower
generation
45,325 GW/hr
Onshore wind
generation
675 GW/hr
Offshore wind
generation
35,950 GW/hr
Biomass
generation
4,900 GW/hr
Biogenic share
of waste
generation
28,000 GW/hr 25.4 GW/hr
Special Report: Renewable energy
Advancesintechnologyhave
encouragedthecreationofbiomass
andgeothermalprojects p8-11
French market
DeCastries
warnsofdanger
ofadditional
bureaucracy p5
p4
Ergo targets 5% market
share in India
On the agenda
Lloyd’ssetto
hostChile
InsuranceDay p7
p3
Chungking/Shutterstock.com
MARKETNEWS,DATAANDINSIGHTALLDAY,EVERYDAY MONDAY5AUGUST2013
ISSUE3,911

2. 2
NEWS
www.insuranceday.com| Monday 5 August 2013
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Distribution
deal cements
Aviva as
Poland’s fourth-
largest insurer
http://bit.ly/14MdZIk
Strong operating profit
at Direct Line Group
http://bit.ly/16dOHpv
AIG p/c profit passes
the $1bn mark in Q2
http://bit.ly/19BYKdc
Global carriers strive for
niche Chinese foothold
as international
investment soars
C
hina’s expanding programme
of international investment is
the catalyst for global insur-
ance groups to secure a foot-
hold in the country as they look for niche
positions in areas such as financial lines
and directors’ and officers’ (D&O) cover
to overcome the overwhelming domi-
nanceofdomesticcarriers.
Foreign insurers account for just 1% of
the Chinese insurance market at present
and although the opening up of the com-
pulsory third-party motor sector to inter-
national players presents them with
fresh opportunities, the distribution
advantages of established Chinese insur-
ers mean domestic companies will retain
theupperhand.
According to Kevin Northcott, who
spearheaded the establishment of Alli-
anz Global Corporate & Specialty’s
(AGCS) D&O operations in Hong Kong
and advised on the establishment of the
group’s Shanghai presence, global
insurance groups need to find areas in
which they are not in competition with
localcarriers.
“[AGCS] is trying to find niche areas
where we can bring own expertise, prod-
uct and network to play. These are areas
wherewedohaveanadvantage.
“As companies expand outside China
they need network partners, which is
what we’re trying to bring to the market-
place – not only D&O but for all property/
casualty products where we can bring
own internal systems to provide interna-
tional insurance programmes. That’s
something only really global carriers can
bringtothemarketplace.”
The exporting of Chinese capital to
back commercial and infrastructure
projects around the world presents one
such advantage, according to Northcott,
who now heads financial lines at AGCS’s
regionalLondonunit.
He pointed to the swathe of class
actions earlier this decade linked to
Chinese participation in the US stock
market as a driver of D&O purchase in
mainlandChina.
“The China D&O market leans more
towards companies with heavy US
exposures,” Northcott said. “But as
Chinese companies expand abroad
this is becoming more important to
them because of their exposure to
otherjurisdictions.”
And the presence of established
D&O carriers – such as Allianz, AIG and
Ace – in China and other emerging
markets in the region means the line is
emerging in a more sophisticated way,
Northcottsuggested.
“Those countries benefit from all
those D&O carriers and their experience
around the world. When those
companies go in they are bringing
with them all that history of product
development, claims management and
riskmanagement.
“These emerging markets benefit
straightawayfromallthathistory.”
But local sensitivities are important,
too, and Northcott is proud of the fact all
AGCS’s employees at its mainland Chi-
nese operations are Chinese nationals
ratherthanexpatsparachutedin.
Richard Banks
Editor
“As companies expand
outside China they need
network partners, which is
what we’re trying to bring
to the marketplace – not
only D&O but for all
property/casualty products
where we can bring own
internal systems to provide
international insurance
programmes. That’s
something only really
global carriers can bring
to the marketplace”
Kevin Northcott
Allianz Global Corporate & Specialty

3. 3
NEWS
www.insuranceday.com| Monday 5 August 2013
Calls for
government to
create ministerial
lead to deal with
motor fraud
challenge
http://bit.ly/15AuyuC
Equinox Global appoints Philpin as
London-based analyst
http://bit.ly/1b1cJqC
HSB Engineering adds duo to power and
energy team
http://bit.ly/1cvXuHW
Ergo targets Indian growth of 5%
above market’s rate of expansion
E
rgo has targeted growth
of around 5% more than
the Indian market’s rate
of expansion during the
next five years as it seeks to take its
marketsharetowards5%.
HDFC Ergo was formed as a joint
venture in 2007 following the end
of HDFC’s previous joint venture
agreement with Chubb and now
has a 3.8% share of the property/
casualty(p/c)market.
Ritesh Kumar, chief executive of
theIndianjointventure,toldInsur-
ance Day the company is targeting
growth slightly ahead of the indus-
tryaverage,whichisexpectedtobe
17% to 18% during the next five
years. “We are averaging 4% to 5%
above that, which would take our
marketsharecloserto5%,”hesaid.
Kumar said the insurer will be
targeting India’s rural population,
withplanstoaddanother50offices
during the next couple of years. He
said the company plans 26 to 27
new offices in this fiscal year,
which runs until the end of March
2014,withanother22to23planned
inthefollowingfiscalyear.
“Our rural business will have to
be run on a hub and spoke model,
with a network of agents and third-
partychannels,”hesaid.
Kumar said non-life insurance
penetration in India was just 0.7%
with a lot of latent demand. He
believes microinsurance and para-
metric covers could prove to be
game-changers if scaled up prop-
erly,bothforcropandcattlecover.
“Demand for health insurance
in India will also grow. Retail per-
sonal lines cover is significantly
under-penetrated, with about
80% not covered by any kind of
health insurance and no social
security system. Around 99% of
homes are not insured, so there is
a lot of latent demand.”
Kumar said the company had
scaled up considerably during the
past five years, from writing
190,000 policies to 3.4 million. He
said India was a €1.3bn ($1.73bn)
market at the turn of the millen-
niumandhasnowdevelopedintoa
€9bn market. Of the overall mar-
ket,46%iscontrolledbytheprivate
sector – Kumar said HDFC Ergo has
8.3% of the private sector, and is
nowrankedthird-tofifth-largestin
mostp/clines.
Ergo grows stake in Vietnamese insurer
to 35% and targets majority share
Ergo has completed its plans to
increase its stake in Vietnamese
property/casualty insurer Global
Insurance Company (GIC) to 35%,
writesScottVincent.
Ergo management board mem-
ber Andreas Kleiner revealed to
Insurance Day last month the
insurer was in the process of
expandingitsstakeinGIC.
The insurer entered the Viet-
namese market in 2011 when it
acquireda25%stakeinsmallViet-
namesenon-lifeinsurerGIC.
The additional 10% of the
insurer has been acquired from
individual shareholders (7.5%)
and Electricity of Vietnam (EVN)
(2.5%). EVN, a state-owned utility
firm,nowholdsa20%stakeinGIC
“Normally the maximum share
in Vietnam is 20% – we received
special dispensation to acquire a
25% stake. We are negotiating
with the Ministry of Finance to
increase that to 35%, and hope to
conclude these negotiations in the
nextfewmonths,”Kleinersaid.
Ergo said it intends to further
increase its involvement in GIC “as
soonasregulatingbodiesallowit”.
“Ergo is aiming for a majority
share in GIC and would like to see
thisbecomearealityassoonasthe
promising Vietnamese insurance
market becomes more accessible
to foreign investors. The World
TradeOrganisationexpectsthisto
occur in the next five years,” the
companysaidinastatement.
Scott Vincent
Deputy editor
“Normally the
maximum share in
Vietnam is 20% – we
received special
dispensation to acquire
a 25% stake”
Andreas Kleiner
Ergo

4. 4
NEWS
www.insuranceday.com| Monday 5 August 2013
Hailstorms to cost German
insurers at least €600m
T
he hailstorms that hit
Germany in late July are
turning out to be much
more costly for insurers
thanexpected.
SV Sparkassenversicherung has
increased its original estimated
loss in buildings insurance from
€100m ($132.8m) to €260m for
60,000damagedbuildings.
“It’s the biggest hail event in the
history of SV and the second-
biggest ever in Germany after the
hail catastrophe in Munich in
1984,” Ulrich-Bernd Wolff von der
Sahl, chief executive of Sparkas-
senversicherung,said.
Accordingtolatestestimates,the
hailstormsoflastweekendwillcost
the German insurance industry at
least€600m.Thisisnottoofarfrom
the €760m insurers had to pay out
tocustomersin1984.
This time, Bavaria seems to have
escaped damage, while the neigh-
bouring state of Baden-Wurttem-
berg registered the majority of
damage. Around towns such as
Göppingen, Esslingen or Reut-
lingen, hailstones the size of tennis
balls inflicted severe damage to
roofsofhousesandcars.
Besides buildings insurance
claims of an estimated €260m, SV
Sparkassenversicherungexpects it
will have to reimburse owners of
3,500 damaged cars with about
€13m. A spokesperson for the
insurer said the relatively low loss
in motor insurance results from
the small number of cars it insured
in the region. In contrast, the
company dominates buildings
insurance in Baden-Wurttemberg,
where it holds close to 70% of all
policies.Thishighmarketshareisa
result of a state monopoly, which
wasonlydiscontinuedin1994.
Allianz, the largest European
insurer, expects it will have to pay
out €200m to clients, the company
said on Friday. Allianz predicts the
catastrophe will lead to close to
40,000 claims each from motor
insuranceandbuildingsinsurance.
WürttembergischeVersicherung
have already recorded claims
amounting to €30m, exceeding its
original estimate by about €5m. As
of now, WGV Versicherungen is
stickingtoits€100mprediction.
In contrast to flooding, for which
German homeowners need addi-
tional insurance, the risk of hail-
storms is part of the standard
German building insurance con-
tract.Thisleadstohighlosseswhen
hail hits densely populated areas.
However, the limited range of such
events means they are usually
manageable, Peter Höppe, head of
geo-risk research with leading
reinsurer Munich Re, said. “Hail-
storms are more locally restricted
than, for instance, winter storms,”
Höppesaid.
ThehailstormsthathitGermany
inlateJulyareturningouttobe
muchmorecostlyforinsurers
thanexpected
Jonas Tauber and Friederike Krieger, Cologne
German correspondents
Allianz indicates full-year operating profit will be
near top end of guidance
Allianz earned good money in the
second quarter and has for the first
time indicated it might also do so
for the full year, writes Herbert
Fromme,Cologne.
During a telephone conference,
group head, Michael Diekmann,
wasoptimistic.Allianzisstickingto
its forecast its operating profit will
be between €8.7bn ($11.56bn) and
€9.7bn. “But the result is more
likely to be at the upper end of that
range,”hesaid.
Europe’s largest insurer is
earning good money in property/
casualty. Worldwide premium
income rose 0.3% to €10.7bn; in
Germany, on the other hand, it fell
1.2%to€1.7bn.Thecombinedratio
of 96.0% was an improvement on
the97.21%ofthepreviousyear,but
that includes settlement profits of
5.7 percentage points. The previ-
ous year this was only 2.1 percent-
age points. The operating result
rose 12.3% to €1.2bn. “Latin Amer-
ica and Turkey are particularly
good growth areas,” finance head,
DieterWemmer,said.
Diekmann pointed out Allianz
did rather well in Turkey and most
south European subsidiaries had
shown positive developments.
“For example, Italy has been
verysuccessful,”hesaid.“Welifted
pay-as-you-drive contracts with
telematics from 6,000 to 160,000,”
he added. Directly sold policies
toppedtheonemillionmark.
Allianz slightly reduced its esti-
mateofthelossesfromthefloodsin
June that hit central Europe. The
event will cost the insurer gross
more than €700m, but its own net
bill would be only €330m; the
group had previously expected
€350m. Of the 50,000 flood losses
so far reported, 32,000 have been
settled, Wemmer said. Additional
claims adjusters have been mobi-
lised and Allianz has increased the
powersofagents.
In life insurance, the group had
to accept a marked drop in the
operating result, which fell 18.2%
to €669m. “At first sight that is not
very pleasing,” Wemmer said.
However,thedropwastheresultof
a long-term risk policy, he said,
adding: “We have to secure our-
selves against falling interest
rates.” When the interest rates
rise slightly again, as they did in
June, some of these security
instruments move into a loss area.
Hardest hit was Allianz Lebens-
versicherung, which saw its oper-
ating result for the second quarter
slip48.7%to€162m.
Diekmann said the group had
been successful in its handling of
the problems with the loss-making
subsidiary Fireman’s Fund in the
US. The company divested a large
part of its agricultural liability
insurance and in future plans to
insure mainly wealthy private cli-
ents and the entertainment indus-
try. As a consequence, sales fell
35.4%to€520m.
“It’s the biggest hail
event in the history
of SV and the second-
biggest ever in
Germany after the
hail catastrophe in
Munich in 1984”
Ulrich-Bernd Wolff von der Sahl
SV Sparkassenversicherung
ThundercloudsinGermany:
accordingtolatestestimates,
thestormsoflastweekendwill
costtheGermaninsurance
industryatleast€600m
TinaRencelj/Shutterstock.com

5. 5
NEWS
www.insuranceday.com| Monday 5 August 2013
Henri de Castries concedes inevitability
of inclusion in systemic importance list
H
enri de Castries said
Axa’s inclusion
among systemically
important insurers
by the Financial Stability Board
“was probably inevitable, even
though the insurance sector as a
whole is convinced its activi-
ties are not systemic”.
While the group
understands “the
regulator’s desire
for more transpar-
ency, given our size
and our geographic
reach”, Axa’s group chief
executive said he does
not “want this to
result in an ava-
lanche of additional
bureaucracy”.
He added the initia-
tivecouldbeagoodthing
if it leads to “reinforc-
ing the idea that
insurers are ele-
ments of stability in
thefinancialsystem”.
Axa also announced
de Castries and deputy chief
executive, Denis Duverne, have
been reappointed by the board of
directors for four years, pending
shareholderapprovalatthegroup’s
nextannualgeneralmeeting.
The French insurance giant
enjoyed a 16% increase in operat-
ing profit in the first half to
€2.58bn ($3.42bn), but saw its net
earnings decline 1% on a like-for-
like basis to €2.46bn, which it
attributed to the negative impact
of interest rate and foreign
exchange hedging instruments.
The company posted turnover of
€50bn, up 4% year on year, with
revenue growth in all busi-
ness lines. Life and sav-
ings revenues grew 5%
to €29.6bn, while
property/casualty
(p/c) premium
income increased 2%
to €16.5bn and asset-
management revenues
rose12%to€1.74bn.
P/c revenue growth
was driven by rate
increases, up 3% on
average, and volume
growth in emerging
markets, whose top line
increased 15% to 2.3bn,
and direct distribu-
tion, where revenues
were up 7% to €1.2bn.
However, mature mar-
kets recorded lower vol-
umes, which were offset by
rate increases, resulting in flat reve-
nueat€13.1bn.
The group’s combined ratio
improved to 95.7% from 96.5% a
year earlier, despite a €73m charge
fromGermanfloods.
De Castries said the combined
ratio was Axa’s best “since the
beginning of this decade and prob-
ablysince2000”.
Combined ratios stand at 95% in
mature markets, 97.6% in high-
growth markets and 99.3% in
directactivities.
The contribution of p/c activities
tooperationalprofitincreased10%
to€1.13bn.
Groupama returns to first-half profitability
French mutual insurer Groupama
returned to profitability in the
first half of this year, posting
a €187m ($114.9m) net
profit, up from an
€87m net loss in
the first half of
2012, and a
€589m net loss
for the full year,
writes Fabien
Buliard, Paris.
However, the com-
pany’s turnover declined
1.4%yearonyear,to€9.2bn,which
the group attributed to its strategy
offavouringprofitablegrowth.
A 1.3% increase in property/
casualty (p/c) premium income, to
€5.14bn, was more than offset by a
4.9%contractioninlifeandsavings
revenue,to€3.95bn.
Groupama indicated the growth
rate of p/c activities in its home
markethadsloweddownasaresult
of “more selective under-
writingmeasures.”
However, the
company still
outperformed
the French mar-
ket with a
p/c turnover
growth of 3.1%,
to €4.08bn,
compared
to 2.5% for
the market as a
whole, driven in
part by rate
increases in
motor and home
lines and selec-
tive development
in professional risks.
P/c revenue declined
5.3% in Groupama’s
international opera-
tions, to €1.05bn,
reflecting local
market trends,
as well as a strict
underwriting
policy, “particu-
larly in Italy”.
The non-life com-
bined ratio improved 2.3
points but is still
above 100%, at 100.3%.
The improvement
reflects lower
claims in France
than in 1H 2012
(down 1.3
points), despite
a number of
weather-related
events, as well as a
lowercostratio.
In life and health
activities, Groupama
recorded a 4.6%
revenue contrac-
tion in France,
to €3.59bn,
explained by
a “voluntary
slowdown” in
sales of euro-linked
policies, and a 7.6% con-
traction in international opera-
tions, to €349m, attributed to
portfolio pruning.
Groupama’s chief executive,
Thierry Martel, said the return to
profitability “after two difficult
fiscal years” shows “the teams’
dedication and commitment has
paid off”.
The group’s solvency ratio stood
at 170% at the end of June, down
from179%attheendof2012.
Fabien Buliard, Paris
French correspondent
“[Axa’s inclusion among
systemically important
insurers] was probably
inevitable, even though
the insurance sector
as a whole is convinced
its activities are
not systemic”
Henri de Castries
Axa
In life and savings activities, Axa
maintaineditsfocusonhigher-mar-
ginproducts,withsalesofprotection
and unit-linked policies increasing
9%and21%respectively,whilenew
business revenue from general
accountpoliciescontracted17%.
The group reported a four-point
increase in new business margin
to 33%, driven by “an improved
business mix and lower unit
costs”. Operational earnings from
life and savings business
increased 12% to €1.53bn.
16%Rise in operating
profit in first
half to...
€2.58bn
€50bn
Axa’s turnover
for the half, a
year-on-year
rise of 4%
Chief executive,
Thierry Martel, said the
return to profitability
“after two difficult
fiscal years” shows
“the teams’ dedication
and commitment has
paid off”
€187m
Groupama’s net
profit for first-
half 2013
1.4%Year-on-year
decline in
Groupama’s
turnover
100.3%
Combined ratio
for the group

6. 6
ONTHEAGENDA
www.insuranceday.com| Monday 5 August 2013
Endurance reveals
quarterlyearnings
AlleyeswillbeonEndurance,
whichpublishesitsfirstquarterly
earningsoftheJohnCharman
era.TheflamboyantCharman
deliveredonhispromiseof
returningtotheinsurance
industryattheendofMay,less
than12monthsafterbeing
oustedaschairmanfromAxis
Capital,thecompanyhefounded
12yearsago.Hehasbeenquickto
stamphismarkonthecompany
andinvestorsandanalystswillbe
lookingforwardtohistrademark
no-punches-pulledcommentary
attheearningscall.
PerettistartsAxis
brokerrelationsjob
Meanwhile,atJohnCharman’s
formeremployerAxisCapital,
RobertPerettistartsinthenewly
createdroleofheadofbroker
relationsanddistributionwitha
brieftoexpanditsstrategic
relationshipswithdistribution
partnersonaglobalbasis.
Peretti,whospent20yearsat
Marsh,includingastintas
managingdirectorintheclient
executivepractice,hasmost
recentlyservedasglobalbroker
leadershipleaderatZurich
GeneralInsurance.
insurance day week ahead diary
MunichRe
announcessecond-
quarterfigures
LossesfromthecentralEuropean
floodingwillbefrontandcentre
astheworld’slargestreinsurer
MunichReannouncesitssecond-
quarterearnings.Concernsabout
thegroup’sprimaryoperations
havebeenlargelymitigatedby
recentrestructuring,butthe
ubiquitousinvestmentdoldrums
remainaconcern.
ArgoandEsure
publishQ2results
Bermuda’s Argo presents
second-quarter earnings,
representing the first outing for
its newly appointed head of
investor relations, Susan Spivak
Bernstein, who joined the
company at the beginning of
June from Alterra Capital.
Also, newly listed UK motor
insurer Esure, which also
operates the Sheilas’ Wheels
brand, publishes its second
quarterly earnings since
floating on the London Stock
Exchange in March.
Novaehoping
toimpress
withinterims
Analystswillbelookingtosee
whetherNovaecancontinueits
recentformofimpressive
earningsasitpublishesits
interims.Generallyseenasthe
pickofthesmaller-capLloyd’s
stocksNovaehashadadecent
storytotellinrecentperiods,
havingrecoveredfromitsdire
situationadecadeago.Butwith
investmentwoesweighing
heavilyonitslargerpeers,the
pressureisontodeliver.
Observerslookat
Economical
earnings forflood
exposuredetails
OneofCanada’slargestgeneral
insurers,EconomicalInsurance,
publishessecond-quarter
earnings,butobserverswillbe
lookingforfurtherdetailsonits
exposuretothetwomajor
floodingeventsinthethird
quarter.Thegrouphasalready
saiditsreinsurancecoverwill
limititscombinednetbillfrom
June’ssouthernAlbertaflooding
andJuly’sGreaterToronto
floodingtoC$60m($57.7m)–
$C$30meach–buthintedthegross
totalwouldbenearerC$100m.
VIGRe celebrates
fifthanniversary
Itisthefifthanniversaryofthe
establishmentinPragueof
ViennaInsuranceGroup’sVIG
Re,originallysetupasacaptive
reinsurerbutwithambitionsto
developanon-groupinwards
accountfromelsewherein
centralandeasternEurope.
Praguewaschosenasa
domicilepartlytoemphasisethe
VIG’scentralEuropeanrather
thanpurelyAustrianidentity,
partlybecauseofthepresenceof
fellowgroupmember
Kooperativa,whichcanprovide
back-officefacilities.
Analystsawait
publicationof
Catlinnumbers
The third of the major listed
Lloyd’s insurers, Catlin,
publishes its interim results
and analysts will be looking to
see whether the group’s
famously smart investment
approach will allow it to stand
out from its rivals.
In the first quarter 12%+
premium growth was driven
mainly by its non-Lloyd’s
operations, with a particularly
strong contribution from
liability and property.
Deadlinefor
namestoprovide
notificationofpre-
emptionapproval
It is the deadline for names to
notify the managing agents of
their syndicates of their
approval for pre-emptions of
more than 7.5% for the 2014
year of account.
The managing agents have
until August 16 to tell the
performance management
directorate whether they have
obtained the requisite approval
for such pre-emptions. Final
syndicate business forecasts are
due on September 12.
Friday,
August 9
Monday,
August 5
Tuesday,
August 6
Wednesday,
August 7
Thursday,
August 8
More than 1,500
are expected at
Ferma forum
Morethan1,500Europeanriskpro-
fessionals are expected at this
year’sFederationofEuropeanRisk
ManagementAssociations(Ferma)
risk-management forum, which
takes place between September 29
andOctober2.
Maastricht is the host city for
this year’s event, which will see
the Ferma board meet to select its
next president.
The incumbent, Jorge Luzzi, has
already indicated he does not wish
to seek re-election. The new presi-
dent will be unveiled at the close of
theFermaforum.
Participantsinpaneldiscussions
at the event will include outgoing
Lloyd’s chief executive, Richard
Ward, Mike McGavick (XL Group),
Dominic Casserley (Willis) and
Axel Theis (Allianz Global Corpo-
rate&Specialty).n
Jakarta to host annual
microinsurance conference
Jakarta will host this year’s annual
international microinsurance con-
ference, which takes place from
November12to14.
The event, which is expected to
draw close to 500 participants, is
hostedbytheMunichReFoundation
andtheMicroinsuranceNetwork.
Details of the agenda are begin-
ning to emerge on the Munich Re
Foundation website, with further
details of sessions expected to be
publishedinthecomingmonths.n
Jakarta:hostcityforthisyear’s
internationalmicroinsurance
conference,whichexpectsto
welcomecloseto500people
Aiyoshi/Shutterstock.com
Maastricht is the host
city for this year’s
event, which will see
the Ferma board meet
to select its next
president
JosefHanus/
Shutterstock.com

7. 7
ONTHEAGENDA
www.insuranceday.com| Monday 5 August 2013
Lloyd’s to host Chile Insurance Day
S
eptember 11 will see
Lloyd’s join forces with
the Insurers’ Association
of Chile to host Chile
Insurance Day.
The afternoon event will be
hostedbyGabrielAnguiano,whois
responsible for Latin Amer-
ican market develop-
mentatLloyd’s.
Speakers include
Jorge Claude, exec-
utive vice-presi-
dent at the
Insurers’ Associa-
tion of Chile, and
Fernando Coloma,
superintendent of securities
and insurance in the Latin Ameri-
cancountry.
One of the major
issues under discus-
sion will be the
implications of new
Chilean insurance
contractlaws,dueto
come into force on
December1thisyear.
Javier Carvallo, an
adjuster with Crawford Chile,
will discuss implications for
claims, control and co-operation
clauses under the new law.
The results of a recent seismic
map project for Chile will also be
presented to the day’s attendees.
The event takes place at Lloyd’s
OldLibraryandbeginsat3.00pm.
Chileisoneofthemostdeveloped
insurance markets in the region, as
demonstrated by the huge interna-
tional footprint of losses related to
Rendez-Vous to begin
on September 7
The annual gathering in Monte
Carlo will begin on September 7 this
year, with a programme of mostly
socialeventsalreadytakingshape.
The “official cocktail party” will
take place at 6.30 pm on Monday,
September 9, hosted by the minis-
ter of state of the Principality of
Monaco at Monte-Carlo Bay Hotel
andResort.
On September 10, Stephen Cat-
lin, chief executive of Catlin Group,
will host a panel discussion on tail
risksatSportingd’hiver.
Already confirmed on the panel
of speakers are Bronek Masojada,
chief executive at Hiscox, Philip
Calnan, partner at Pricewater-
houseCoopers, and Franklin Mon-
tross, chairman and chief
executiveatGeneralRe.
For more details of official
events, visit: www.rvs-monte-
carlo.com/programme.n
Napslo to meet in San
Diego on September 30
This year’s National Association of
Professional Surplus Lines Offices
(Napslo) annual convention begins
in San Diego (pictured) on Septem-
ber30.
Theopeningdayoftheeventwill
host Napslo’s Next Generation
Leadership workshop, with a Next
Generation panel discussion and
cocktail reception taking place the
followingday.
Ben Stein, economist and col-
umnist for The Wall Street Journal,
isaguestspeakerattheevent.
For full details of the Napslo
meeting,visitwww.napslo.org.n
ITC to take
place on
September
24 and 25
This year’s Insurance Technology
Congress takes place on Septem-
ber 24 and 25, organised by Insur-
ance Day and standards
organisation ACORD.
Confirmed speakers include Bill
Pieroni, global chief operating
officer at Marsh, and the chief
information officer at Mitsui Sumi-
tomo,RichardWilliams.
The title of Pieroni’s and Wil-
liams’ ITC presentations are: “Lev-
eraging data and analytics for
value creation” and “Insurance in
theageofagility”respectively.
Meanwhile, Lloyd’s head of mar-
ket operations, Rob Humphreys,
will outline the role the market’s
Central Services Refresh project is
expectedtoplayinhelpingtoensure
Lloyd’s maintains its position as the
global centre for specialist insur-
anceandreinsurance.
Visit http://2013.itcevent.com
forfurtherinformation.n
Scott Vincent
Deputy editor
the 2010 earthquake, which caused
insuredlossesofmorethan$8bn.
According to Swiss Re’s most
recent sigma report, Chile had a
total premium volume of $10.49bn
in 2012, the 39th largest insurance
market in the world. This repre-
sentedgrowthofaround8.5%com-
paredwith2011.
Chile’s non-life sector gener-
ated premiums of around $4.35bn
last year. n
$10.49bn
Chile’s total
premium volume
in 2012
Inclusive insurance markets webinar
scheduled for end of August
August 28 will see the Microinsur-
ance Innovation Facility and
Access to Insurance Initiative
jointly host a webinar on inclusive
insurancemarketdevelopment.
The webinar will examine how
collaboration between supervi-
sors, industry players, policymark-
ers and donors is already showing
positiveresultsinsomecountries.
Speakers will include Peter van
den Broeke, principal administra-
tor at the International Association
of Insurance Supervisors, Joselito
Almario,directorattheDepartment
of Finance-National Credit Council
A representative of the Micro-
insurance Innovation Facility will
alsotakepartinthediscussions.n
The webinar will examine how collaboration between
supervisors, industry players, policymarkers and donors
is already showing positive results in some countries
in the Philippines, and Lemmy
Manje, microinsurance coordina-
toratFinmarkTrustinZambia.
Santiago,Chile
GaryYim/
Shutterstock.com

8. Capitalising on
O
nce a sector unfamiliar
to change, the inter-
national power and
energy market has
recently seen large changes world-
wideinitsabilitytoproducerenew-
able power, creating the driving
forceforthisexpandingmarket.
As the drive to decarbonise the
energymarketsacceleratestomeet
greenhouse gas reduction targets,
there has been significant and
increasing pressure placed on
traditionally risk-averse utilities
to be more innovative in their
approachtocarbonreduction.
For instance, Germany has
already committed to generating
30% of its power from renewable
energy by 2030 and 60% by 2050,
while continuing to phase out its
reliance on nuclear power com-
pletely over the next nine years.
WithinGermany,biomassmakesup
30%ofthatrenewableenergymix.
With respect to the international
biomass market, this presents a
distinct opportunity – particularly
as coal-fired power plants are de-
commissioned and power plant
lifetime extensions come to a close.
Itisalsoimportanttorememberthe
closing of these units and pulling
them apart is expensive. Increas-
ingly, utilities are looking for ways
in which to handle the transition
and extract the greatest possible
valueoutofthepowerplant.
In the case of Electrabel, a sub-
sidiary of GDF-Suez, this has
resulted in a €125m ($189.5m)
investment in a previously coal-
fired power station in Ghent, to
convert it into a 180 MW biomass
generator that taps into much of
thelegacyinfrastructure.
Transitioning
It is a sensible move, albeit with
increasing pressure from the EU,
and for the utility it presents a via-
blemeansthroughwhichtoreduce
the risk of switching to new fuel
sources, while hedging against the
initialinvestment.
Cost is of course always critical
and a factor that until now has
meantthegeothermalandbiomass
Advancesintechnologyandthecatalyst
thisyearhaveencouragedthecreation
projects. However, it is important for
of the commercial realities and other
Blowing in the wind
T
he UK renewable energy
sector is awash with cash
as the country seeks to hit
agreed international tar-
gets on energy generation from
renewablesources.WithUKgovern-
mentbondyieldsandglobalinterest
rates at record lows, investors are
attracted to the UK energy sector,
which offers long-term agreements
and index-linked returns under
schemes guaranteed by the govern-
ment. Such investments often pay
four or five times the rate of return
onagovernmentbond.
Green subsidies such as renew-
able obligation certificates (ROCs),
feed-in tariffs (FITs) and renewable
heat incentive (RHI) green certifi-
cates are just some of the tools used
by the UK government issued to
incentiviserenewablegeneration.
The goal is RHI and similar
schemes will increase the propor-
tion of heat produced from renew-
able sources from 1% to 12% by
2020.Thiswouldsaveabout60mil-
lion tonnes of CO2 by 2020, helping
to minimise heating effects on cli-
mate change and ensure the UK
meets its commitments to achieve
these targets under the Kyoto
agreementonclimatechange.
Windpowerrunningoutofpuff?
In the early days of renewable
investments,attentionwasfocused
on wind power. However, invest-
ments in this sector have encoun-
tered many setbacks even though
the UK is considered a good candi-
dateforwindgeneration.
Planning issues have become a
significant barrier to the establish-
ment of more wind farms as it
becomes increasingly difficult to
obtainpermissionfortheconstruc-
tion of large wind turbines. Both
onshore developments, and off-
shore developments close to land,
struggleagainstobjectionsoverthe
visualand noiseimpact of thesites.
Concernshavealsobeenraisedoff-
shore farms may pose a danger to
shipping and have an adverse
impactonmigratorybirds.
Although investment in wind
continues, issues like these mean
there is a growing appetite for a
morediverserenewableportfolio.
Solarcontinuestoshine
In recent years, one of the best
renewable investments has been
solar. Three years ago, it seemed
many investment funds and spe-
cialistcontractorsplannedtocover
every available south-facing roof
of commercial or private property
with solar panels. At that time the
insurance market was seeing mul-
tiple enquiries from companies
confidently predicting multimil-
lion pound investments and fabu-
lousratesofreturn.
Ingeneral,thesereturnsfailedto
materialise except for the very
early movers as the government
moved quickly to restructure what
proved to be an over-generous
incentivesystem.
Solar investments today focus
less on encouraging small scale
domestic production, but more on
large ground-based solar arrays
where the cost is now less than
£1m ($1.5m) per megawatt (less
than half the cost of a similar-
sized wind farm development).
Unlike wind turbines, solar arrays
require very little maintenance
onceinstalled.
Howistheinsurancemarketrespondingtothe
flowofinvestmentintherenewableenergysector
despitetheanticipatedboominwindfarm
developmentsfailingtomaterialiseintheUK?
Fraser McLachlan, chief
executive,
GCube Insurance
Ian Harris, senior
underwriter –
renewable and
alternative energy,
Ace
Continuedonp10 >>
8
SPECIALREPORT/RENEWABLEENERGY
www.insuranceday.com| Monday 5 August 2013
talising on the potential
familiar
e inter-
er and
et has
s world-
erenew-
driving
rket.
nise the
stomeet
targets,
ant and
ced on
utilities
in their
ion.
ny has
nerating
newable
by 2050,
e out its
er com-
e years.
makesup
gymix.
national
esents a
ularlyas
are de-
plant life-
lose. It is
rtheclos-
ng them
business.
okingfor
e transi-
possible
.
l, a sub-
his has
technologyandthecatalystprovidedbytheUSFarmBillearlier
veencouragedthecreationofbiomassandgeothermalenergy
owever, it is important for insurers to gain an understanding
mercial realities and other risks associated with these projects
hlan,
e,
w.insuranceday.com| Monday 5 August 2013
able way to produce power – some-
thingthatintimesofsuchausterity
isveryimportant.
In real terms that means geo-
thermal electricity generation, for
instance, comes in at between 4.5¢
to 7.5¢ per KW/hr. That is a pric
point that is competitive with
many fossil-fuelled facilities, with
the added advantage they do not
emit the carbon that comes with
thosefacilities.
Reliability of the technology is a
key factor, and for many years has
kept even the most ambitious
developers from investing. How-
ever, even this challenge is starting
tobeovercome.
Lifespan
Indeed,withmanygeothermaland
biomass plants now offering an
average working lifespan of
between 30 to 50 years, the high
level of initial investment required
quickly drops away, with many
investors looking to break even
within10to15years.
This, coupled with an overall
reduction in operating costs and a
higher base load operational
output, provides a level of depend-
ability that remains competitive
anddesirable.
Perhaps it is because of this new
sources of capital are emerging
within both markets and in more
matureeconomiesaswell.
Investors can sense the potential
and because of investment oppor-
tunities opening up from the likes
oftheWorldBankandtheUK’sown
Green Investment Bank, increas-
ing numbers of projects are now
reachingfinancialclose.
Sowhatdoesallthismeanforthe
www.insuranceday.com| Monday 5 August 2013
Case study: Germany’s
and energy generation
Source:FederalMinistryforEnvironment,NatureC
Germany has already committed to
generating 30% of its power from renew-
able energy by 2030 and 60% by 2050, while
continuing to phase out its reliance on
76,017 MW
Total installed
capacity
45,325 GW/hr
Onshore wind
generation
35,950 GW/hr
Biomass
generation
28,000 GW/hr
Photovoltaic
generation
136,07
Total electricity
Windturbines:thewidely
anticipatedboominwindfarm
developmentshasfailedto
materialiseintheUK
Pedrosala/Shutterstock.com

9. the potential
providedbytheUSFarmBillearlier
ofbiomassandgeothermalenergy
insurers to gain an understanding
risks associated with these projects
9
renewable capacity
ConservationandNuclearSafety
nuclear power completely over the next
nineyears.
Within Germany, biomass makes up 30%
ofthatrenewableenergymix.
21,200 GW/hr
Hydropower
generation
675 GW/hr
Offshore wind
generation
4,900 GW/hr
Biogenic share
of waste
generation
25.4 GW/hr
Geothermal
generation
75 GW/hr
y generation
markets have not been sufficiently
competitive. With the increasing
need for renewable power the
levelised cost of energy from these
new clean energy generating
sources is proving to be significant
intheconversiontoamoresustain-
able way to produce power – some-
thingthatintimesofsuchausterity
isveryimportant.
In real terms that means geo-
thermal electricity generation, for
instance, comes in at between 4.5¢
to 7.5¢ per KW/hr. That is a price
point that is competitive with
many fossil-fuelled facilities, with
the added advantage they do not
emit the carbon that comes with
thosefacilities.
Reliability of the technology is a
key factor, and for many years has
kept even the most ambitious
developers from investing. How-
ever, even this challenge is starting
tobeovercome.
Lifespan
Indeed,withmanygeothermaland
biomass plants now offering an
average working lifespan of
between 30 to 50 years, the high
level of initial investment required
quickly drops away, with many
investors looking to break even
within10to15years.
This, coupled with an overall
reduction in operating costs and a
higher base load operational
output, provides a level of depend-
ability that remains competitive
anddesirable.
Perhaps it is because of this new
sources of capital are emerging
within both markets and in more
matureeconomiesaswell.
Investors can sense the potential
and because of investment oppor-
tunities opening up from the likes
oftheWorldBankandtheUK’sown
Green Investment Bank, increas-
ing numbers of projects are now
reachingfinancialclose.
Sowhatdoesallthismeanforthe
insurance markets? And how can
the industry better support these
nascent technologies while getting
abetterhandleontherisk?
First and foremost, of course,
this starts with the wider market
increasing its existing under-
standing of the technology and the
sheer scale of the challenges that it
faces. For both the biomass and
geothermal markets, this all comes
9www.insuranceday.com| Monday 5 August 2013
down to cash. There are no two
ways about it – to safeguard future
industrysuccessitisimperativefor
the biomass and geothermal sec-
torstosecureadequateriskcapital.
Confidence
This enables developers to lock in
early-stage financing, manage
construction and instil increased
levels of industry confidence in the
developmentofthesupplychain.
Collectively, the risk issues
remain largely the same as for the
rest of the power sector, although
the specific market nuances are of
course interesting and require a
more specialist approach to insur-
anceandrisktransfer.
Regulatory risk, credit risk and
resource risk remain major barri-
ers that underpin the so-called
bankability of the project. These
are common issues the insurance
industryquicklyneedstoaddress.
At GCube we are already trying to
overcome some of these challenges
through the development of new
risk solutions that begin to under-
write the performance risk of the
technology, which provide limits,
guaranteesandprotectionfordevel-
opersandtheparentcompanies.
However, that is not to say all
biomass and geothermal initiatives
are viable. Indeed, while the
number of enquiries we receive to
underwrite projects remains high,
at present we only choose to under-
writeaboutonein10opportunities.
Long-termrelationships
Why? Primarily because we are
only willing to develop creative
insurance products for clients that
value the upfront benefit of our
experiences within the market to
date – and are looking for a long-
termcommercialrelationship.
For too long this level of complex
insurance has been treated as a
commodity by developers and
their advisers, with the inevitable
priceracetothebottom.
For GCube, that is simply too
much of a short-term view and
doesnotofferafullandtrueunder-
standingoftherealrisk.
Webelievetheinternationalbio-
mass and geothermal markets are
yet to realise their potential, and
whenitcomestounderwritingand
insurance, we must take a fresh
approach. An approach that
engagesthelikesofGCubefromthe
very start and that positions the
insurance partner as an important
and fundamental part of the
projectteam.
There is no doubt the wider role
of international renewable energy
over the next 10 to 15 years is set to
escalate and new technologies are
coming to the fore. We must not
forget to capitalise on the sector’s
potential,itisessentialtogainafull
understandingofcommercialreal-
itiesandtherisksassociated.n
Abiomasspowerplant:the
internationalbiomassand
geothermalmarketsareyetto
realisetheirpotential
Nostal6ie/Shutterstock.com

10. Biomassisgainingtraction
As cuts in FITs and the costs of
administering multi-location
investments have slowed, so the
focus for renewable energy invest-
ment has shifted to biomass boil-
ers. According to the latest figures
from the governing body Ofgem,
biomassaccountsfor160ofthe168
projectsapprovedundertheRHI.
The RHI payment substantially
reduces the cost of replacing tradi-
tional large domestic and commer-
cial oil and gas and LPG-powered
boilers with woodchip boilers.
Easy to install into an existing sys-
tem, woodchip boilers neatly cir-
cumvent the issue of constantly
fluctuating oil and gas prices.
When you add the RHI payment
and long-term fixed and guaran-
teed price deals for the wood chips,
investing in biomass boilers
becomes very attractive to owners
of commercial properties. Private
finance initiative contract holders
such as schools and hospitals could
alsobenefit.
Onalargerscale,Draxplc,theUK
coal-fired power station giant, said
only last week it was converting a
second660MWunittobiomassnext
year, with a third possible in 2017
depending on government incen-
tives. It is keen to increase its bio-
mass electricity generation, which
can fall within government “sus-
tainable” energy targets, although
efforts so far have been hampered
bythelogisticsofprovidingasteady
flowofsufficientwoodpellets.
As trends in renewable energy
change, we believe as long as the
existing subsidy regime remains in
place and interest rates remain
low, money will continue to be
invested in solar and biomass in
ever-increasingamounts.
Rates
Ongoing high demand for capacity
combined with perceived low lev-
els of risk has attracted much new
capital into the insurance market
over the past 18 months with an
inevitable impact on rates, particu-
larlyforsolarandwindrisks,which
arenowathistoricallylowlevels.
However, waste to energy and
biomass risks present a different
risk profile and an increasing
number of losses are causing con-
cern. Fire is a major risk in energy
production of this kind and the
market is adjusting to the impact of
too many cases where risks were
underwritten without appropriate
fireprotectionorsuppressiontech-
nologiesinplace.
In some places the market is
learning the lesson that cheaper
rates and higher volumes are no
substitute for experienced and
A captive solution for renewable energy
G
uernsey Finance estab-
lished a cleantech focus
group towards the end
of 2011. This group
was specifically set up to look at
how the island’s banking, fiduci-
ary, insurance and investment
fund sectors could capitalise on the
rapidly growing interest in clean-
techandrenewableventures.
The cleantech group comprises
representatives from each of the
four industry sectors previously
mentioned, but it was initially
borne out of wanting to see the
island’s expertise in infrastructure
funds being used for vehicles
linked to wind farms and other
advancedcleantechnologies.
From here we recognised we
could call on the other areas of
Guernsey’s financial services
sector to help with this growing
area and establish Guernsey as a
cleantech hub that can provide
services to set up funds, assist
with financing and introduce
companies to investors. For
example, our fiduciary sector
may offer access to high-
net-worth individuals around
the world who may be interested
in supporting ethical and sustain-
able investments.
Cross-sectorknowledge
Involving the insurance sector in
our cleantech group is an essential
part of this wider offering and
means we have a number of cap-
tivemanagersinthegroupwhoare
able to call up on the renewable
energy expertise already available
in their respective firms. The
group is all about bringing cross-
sector knowledge together to build
synergies, and insurance plays an
important part in this. This is
especially so when you consider
the cost of annual insurance to mit-
igate the risks associated with
renewable energy projects could
triple by 2020, according to a new
report sponsored by global re-
insurer Swiss Re, while a 2013
Captive Managers Survey indi-
catedalternativeenergywasoneof
the top 10 emergent captive risks
overthenexttwoyears.
Indeed,Guernsey,astheleading
captive insurance centre in
Europe and fourth-largest in the
world, provides a unique service
required by cleantech companies.
Cleantech projects are, by their
very nature, new and often
speculative ventures, run by
pioneering entrepreneurs. This
means the traditional markets
findithardtoratethistypeofbusi-
ness. This, in turn, means under-
writers will rate conservatively to
try and ensure underwriting
profit and potentially charge a
greater premium than the actual
risk mightwarrant.
The use of a captive insurance
company can help to reduce the
overall insurance spend and bring
greater certainty to the insurance
budgetingprocess.Acaptiveinsur-
ance entity is a vehicle owned by
the cleantech project that would
write and retain some or all the
risks arising from the project. This
allows the project to show the re-
insurance market it is confident in
itsownriskmanagement,sinceitis
willing to retain some of that risk
formallyforitsownaccount.
Thereareanumberofbenefitsof
applyingthecaptiveinsurancecon-
cepttocleantechprojects(seebox).
Earlydays
Whileitmightstillbeearlydaysfor
thiscaptiveconcepttobefullyused
and understood by those in the
renewable energy arena, if they
don’t have a “cradle to grave”
insurance programme that covers
adequate risks in a cleantech or
renewable venture, then projects
may not get the financing they
requirefrominvestorsorbanks.
As the renewable energy sector
grows and cleantech projects
become more prominent, I firmly
believetheroleofcaptiveswithinit
will increase, leaving Guernsey
particularly well placed. This is
especially true when you consider
the island is home to a number of
captive insurance companies
linked to the energy sector, which
Theuseofacaptiveinsurance
companycanhelptoreducethe
overallinsurancespendand
bringgreatercertaintyto
cleantechandrenewable
energycompanies
Fiona Le Poidevin*,
chief executive
Guernsey Finance
Continuedfromp8
10
SPECIALREPORT/RENEWABLEENERGY
www.insuranceday.com| Monday 5 August 2013
The use of a captive
insurance company
can help to reduce
the overall insurance
spend and bring
greater certainty to the
insurance budgeting
process. A captive
insurance entity is a
vehicle owned by the
cleantech project that
would write and retain
some or all the risks
arising from the
project. This allows the
project to show the
reinsurance market
it is confident in its
own risk management,
since it is willing to
retain some of that
risk formally for its
own account
The benefits of
using captives to
cleantech projects
Thereareanumberofbenefitsofapplyingthecaptiveinsuranceconcept
tocleantechprojects.Someofthese benefitsare:
Avoidanceofpremiumvolatilityarisingfromtheinsurancecycle;
Abilitytopayonlyforyourownrisk/lossperformance;
Captureofunderwritingprofit;
Captureofinvestmentincome;
Accesstoreinsurancemarkets,whicharethewholesaleequivalent
oftheretailinsurancemarkets;and
Abilitytowritebespokecoversorwiderwordings.
Guernsey:asEurope’sleading
captiveinsurancecentre,the
islandcanprovidesaservice
requiredbycleantechcompanies

11. projects
competent underwriters and sen-
sible risk selection. As newer
capacity moves out of this area, so
rates and excess levels are read-
justing as experienced players
work ever more closely with risk
managers to ensure all the critical
elements of an appropriate risk
managementstrategyareinplace.
Withthetideofinvestmentshow-
ingnosignofdiminishing,Iamcon-
fident the insurance market will
risetothechallengeandcompanies
will be able to secure high-quality
coverforwell-managedrisks.n
already contain an element of
renewable risk. We also boast a
number of innovative renewable
energy funds, such as Bluefield
Solar Income Fund, a Guernsey
registered, closed-ended collective
investment scheme that raised
£130m ($196.9m) for its listing
on the premium segment of the
London Stock Exchange (LSE)
on 12 July 2013, while another
Guernsey fund, The Renewables
Infrastructure Group, has recently
raised £300m on the LSE so it
can buy a portfolio of 14 onshore
wind farms and four solar photo-
voltaic parks in the UK, France
andIreland.
These recent investment funds,
together with other projects in the
pipeline, show there is great inter-
est and renewed confidence in this
rapidly evolving sector, with
Guernsey already playinga central
partinseveralareas.n
* FionaLePoidevinisthefounder
oftheGuernseyCleantechgroup
Meeting the energy
challenge needs better
long-term thinking
G
overnment support for
offshore wind and sub-
sequent inward invest-
ment has helped
transform the German city of
Bremerhaven, which suffered seri-
ouseconomicdeclineinthe1980s.It
isnowahubforthemanufacturing,
supply and export of wind turbines
and plays host to a wide variety of
research and development, includ-
ing a rotor blade test facility. It
shows what can be done if the right
signalsaresenttoinvestors.
For the UK, the question is how
wecanlearnfromthis.Withoutthe
right long-term thinking, the UK
willstruggletoreplacethe19GWof
UK power plants that are set to
close in the next decade, let alone
turn this country’s renewables
potential into a sustainable,
export-ledsuccessstory.
The scale of the prize should not
be underestimated. Get the policy
framework right and it can deliver
growth, help rebalance the econ-
omy (including to many less pros-
perous regions) and deliver energy
security. It can also help tackle car-
bon emissions, which are contrib-
uting to climate change and
making extreme weather events
morecommonandmorecostly.
Stepintherightdirection
Last week saw the British govern-
ment publish its offshore wind
industrialstrategy.Itisastepinthe
right direction, including £66m
($100.7m) of funding to improve
supplychainsandhelpdelivernew
products.Thegovernmentsaidthis
could help the industry provide
30,000 jobs and £7bn to the econ-
omy by 2020. However, these fig-
urescouldprovetobepieinthesky
if there continues to be a lack of
clearpolicy.
In June, an important opportu-
nity was missed. A bid to include a
target to decarbonise the UK’s elec-
tricity generation by 2030 in the
EnergyBillwasnarrowlydefeated,
despiteasignificantrebellionfrom
the government’s backbenches.
The amendment was backed by
dozens of green campaigners,
industry bodies and businesses
(including RSA) because the target
would have provided greater long-
term certainty to investors,
thereby encouraging greater
uptake of renewables, carbon cap-
ture and storage and nuclear
powertoslashcarbonproduction.
The coalition has promised to
enable the energy and climate
changesecretarytoconsidera2030
decarbonisation target in 2016,
after the next election. But while
the months pass so do the opportu-
nities as investors increasingly
look to Asia, South America and
SouthAfrica.
Recent research by Bloomberg
New Energy Finance shows invest-
ment in the UK’s renewable energy
has fallen to a seven-year low, with
investors reconsidering their
options as a result of the govern-
ment’sperceivedlackofaclearcom-
mitmenttodecarbonisingthepower
sector. The lack of a longer-term
market signal beyond 2030 risks
making some renewable projects,
such as the UK’s Round 3 offshore
wind programme, uneconomic
giventhetimeframesinvolved.
Similar battles continue in the
EU. The European Commission
estimates the renewables sector
could provide five million jobs
across Europe by 2020 but we have
yet to see the specific 2030 renewa-
bles targets that could help sustain
them. Such targets provide the
policy stability necessary to
encourage the investment that
will reduce the cost of renewable
technologies in the long term and
create jobs and growth in the
energy sector and in other related
industriessuchasinsurance.
Wakinguptotheopportunities
Meanwhile, the rest of the world is
rapidly waking up to the opportu-
nities renewables provide, with
China leading the way. Without a
clear policy and regulatory frame-
work over the next few decades,
there is a risk the EU will miss out
muchinwardinvestment.
In the UK, plans to include a tar-
get in the Energy Bill are not yet
completely scuppered as the
amendment will be revisited as the
bill works its way through the
House of Lords. We need the gov-
ernment to support the amend-
ment and provide the signals
investors need. When he became
prime minister, David Cameron
promised to lead the “greenest
government ever”, but more lead-
ership and vision are needed if we
are to nurture a diverse and bal-
ancedenergyportfolio.
TheUKcanbeawinnerinthenew
green economy, not just in onshore
and offshore wind but also a wide
range of renewables such as wave
and tidal power. The recent Ernst &
Young Renewable Energy Country
Attractiveness Index ranked us
sixth in the world, but with older
rivals such as Germany at number
two, it is clear we are at an impor-
tant junction. The wind industry
centreatBremerhavenshowswhat
can be achieved when government
commitmentisbackedupbyaclear
andstablepolicyframework.n
BremerhaveninGermanymightnotyetbethesummerholiday
destinationofchoiceforUKinsurersbutitisagreatexampleofhow
politicalbackingforrenewableenergycanrevitaliseanarea
Steve Kingshott,
global director for
renewable energy
RSA
11www.insuranceday.com| Monday 5 August 2013
Last week saw the
British government
publish its offshore
wind industrial
strategy. It is a step in
the right direction,
including £66m of
funding to improve
supply chains and help
deliver new products.
The government said
this could help the
industry provide
30,000 jobs and £7bn
to the economy by
2020. However, these
figures could prove to
be pie in the sky if
there continues to be a
lack of clear policy

12. Nuclear plant: Duke
Energy shelves Levy
County plan
Severe weather: New Zealand storms
cost NZ$33m
D
uke Energy, which in
February secured an
$835m claim from
Nuclear Energy Insur-
anceLtd(NEIL)afterretiringrather
than repairing its Florida-
based Crystal River facil-
ity, has filed a revised
settlement with the
Florida Public
Service Commis-
sion (FPSC),
designed to speed
up the payment,
which will see it
take a $360m charge
inthesecondquarter.
The agreement between
Duke Energy and NEIL, which was
brokered by a mediator, calls for
the $835m claim to be shared
between Duke Energy customers
andtheownersofthenuclearplant,
which was closed in 2009 after a
sizeable crack in its concrete con-
tainment vessel wall was discov-
ered during work to replace ageing
generators. Repairs to that fault in
2011, thought to have cost close to
$500m,onlycreatedmorecracks.
DukeEnergyhasmeanwhilealso
shelved its plans to build two 1,100
MW nuclear units in Levy County,
Florida, blaming delays in
securing licenses from
the Nuclear Regula-
tory Commission,
as well as legisla-
tive changes in
thestate.
ItsrevisedFPSC
settlement will see
it write off $295m
associated with the
Crystal River facility and
$65mrelatedtothewholesale
allocation of investments in the
Levy nuclear project, as well as
accelerate the recovery of $135m in
cashflowsrelatedtoCrystalRiver.
Richard Banks
Editor
NEW ZEALAND: More than NZ$33m ($26m) of insured damage was caused by a storm that hit New Zealand
attheendofJune,theInsuranceCouncilofNewZealand(ICNZ)hasreported.
“New Zealand’s generally high levels of insurance uptake make for a quick economic recovery at times like
this with close to 9,500 claims valued at more than NZ$21m settled for home and contents damage and NZ$9m
forcommercialclaims,”ICNZchiefexecutive,TimGrafton,said.
Homeandcontentscovermadeup85%ofclaims,butonly62%ofthetotalvalue.
Updates
$835m
Size of the claim
for the Crystal
River facility Duke
Energy secured
from NEIL
Hurricane Sandy: AIG increases reserves
by $142m
US:AIGhasbuckedtheoveralltrendofstableorreducingSandylossestimatesbyincreasingitsreserveforthe
storm by $142m during the second quarter. This was the main contributor to adverse prior-year development
of$154minAIG’sproperty/casualtybusinessduringthesecondquarter.
“TheseadditionalSandylossesrelatedtoasmallnumberofexistinglargeandcomplexcommercialclaims,”
theinsurersaidinitsresultsstatement.
AIG’ssecond-quarterresultsalsoincludedcatastrophelossesof$316mrelatedtoeventsthisyear.
Property
$360m
Second-quarter
charge Duke will
take to speed up
the claim’s
payment
$500m
Cost of repairs
to the nuclear
facility in 2011,
which caused
more damage
$295m
Amount Duke
will write off in
relation to the
Crystal River
facility
$65m
Amount Duke
will write off
related to the
cancelled Levy
project
European floods: Axa reports €73m bill
GERMANY: French insurer Axa recorded a €73m ($96.8m) charge related to the German flooding during the
second quarter. However, the group’s combined ratio improved to 95.7% from 96.5% during the comparable
period a year earlier. The group’s chief executive, Henri de Castries, said the combined ratio was Axa’s best
“sincethebeginningofthisdecadeandprobablysince2000”.
$135m
Amount Duke
will recover in
cashflows from
Crystal River