ARK SYNDICATE MANAGEMENT LTD

Offshore Windenergie – Aus Sicht des Londoner Marktes

Lloyd’s Meet the Market, Frankfurt 21/04/2015 Simone Streidl – Underwriter Renewable Energy

Content

• Ark Syndicate 4020

• Offshore Wind Industry Update

• Loss Statistics

• Wordings

Contingent Business Interruption (CBI)

Multi-year policy periods

Increasing sub-limits

Design error / Defective parts (LEG 3)

• Conclusion

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Inhalt

• Ark Syndicate 4020

• Offshore Wind Industrie

• Schadenstatistiken

• Vertragsklauseln

Zulieferer und Abnehmer bedingte Betriebsunterbrechung

Versicherungspolicen mit mehrjaehriger Laufzeit

Ansteigende Haftungsbegrenzungen

Designfehler und schadhafte Teile (LEG 3)

• Zusammenfassung

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Ark Syndicate 4020

• Syndicate 4020 at Lloyd’s

• Diversified and balanced portfolio of reinsurance and insurance business

• Experienced team of underwriters in their specialist areas

• Clear understanding of our clients and producers

• Long term relationships

• Lloyd’s market ratings: AM Best: A (Excellent) / S&P’s: A+ (Strong)

• The Renewable Energy team at Ark

Worldwide portfolio

Construction All Risks and Operational All Risks

Products: Onshore and Offshore Wind Farms - Solar (PV and Thermal) –

Geothermal - Wave & Tidal - Hydroelectric

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Industry Update

Source e: EER, BTM; Global Data; Roland Berger

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Industry Update

Source: EER; BTM; Global Data; Roland Berger

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Loss Experience

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Offshore Wind Construction Claims Spread of Costs

Cable claims 40.3 %

Collision 6.9 %

Electrical 12.5 %

Foundations 15.3%

Fire 1.4 %

Lightning 2.8 %

Blades 4.2 %

65% 1%

16%

5%

5% 8%

Vessel Charges =65%

Special Machinery(Third Party) = 1%

Site Works(contractor labour)= 16.5%Materials = 5%

Engineering (survey/ consultants) =4.5%Admin (overhead /legal / insurance) =8%

Wordings

Broad Scope of Cover

• Contingent Business Interruption

Potential bottlenecks on the supply side for components

Very broad covers including weather risk, vessel availability

• Multi-year policy periods for operation after the construction phase

• Increasing sub-limits

• Design error / Defective parts (LEG3)

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Bottlenecks

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Contingent Business Interruption (CBI)

• Offshore converter stations

Bottleneck

Long lead times due to limited number of suppliers and delivery time from 30 to 50 month

• Offshore HVDC cables and cable laying

Only few suppliers. Shortages may occur

• Installation vessels for converter stations

Only few vessels can install converter stations >10,000 t

• Transmission system operator (TSO)

TenneT to provide grid connection for all projects in the German North Sea

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Contingent Business Interruption (CBI)

Wording

• Contingent business interruption for the following scheduled assets:

The export transmission system (from the wind farm operator owned assets

until connection with onshore national grid) as owned by grid operator

• Überblick der Haftung gemäß EnWG §17e ff. – Belastungsausgleich

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Multi-year policy periods for operation after the construction phase

• CAR policy period up to 60 month

• 24 month maintenance and discovery period

• 12 month visits maintenance

• Up to three years operational policy period without break clause

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Increasing sub-limits

TIV or CSL PLUS:

• Sue and Labour 25% of Sum Insured

• Removal of Debris 25% of Sum Insured

• Extra Expenses 25% of Sum Insured

WINDCAR Wording:

Sue and Labour: additional limit of EUR 25,000,000 each occurrence and subject to a combined

aggregate limit for the period of section I of EUR 50,000,000 with the Removal of Wreck

provision.

Removal of Wreck: additional limit of EUR 25,000,000 each occurrence and subject to a

combined aggregate limit for the period of section I of EUR 50,000,000 with the Sue and Labour

provision.

Extra Expense Clause: additional limit of EUR 25,000,000 each occurrence

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Design error / Defective parts

What is a defect?

• Defect of design, plan, specification

• Defects of Materials

• Defects of Workmanship

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Damage vs. Defect

• Question: How to distinguish “damage” from “defect”?

• A defect can be defined as follows:

• A condition causing premature failure which is present in the relevant part… When

it is constructed or installed… Or which comes into existence as a result of the way

in which the relevant part was designed, constructed or installed.

• Traditional distinction between “defect” and “damage” is that damage requires

some kind of occurrence whereas defect is a state of affairs.

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Design error / Defective parts

London Engineering Group (LEG) defects wordings

• LEG1/96

Outright defects exclusion – all costs are excluded

• LEG2/96

Cost excluded is the cost that would have been incurred to replace the defective part had it been

established that they were defective prior to failure.

• LEG3/06

It is only the additional cost of improving the design that is excluded

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Design error / Defective parts (LEG3)

Wordings

LEG 2/96 applicable to turbines

LEG3/06 applicable to all other property

However:

• Offshore Wind - mobilisation / vessel costs!!

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Conclusion

• Technological Development

• Pressure to reduce costs

• Increased risk

• Pressure on Terms and Conditions

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Questions? / Fragen ?

Simone Streidl

Underwriter

Renewable Energy

Syndicate 4020 at Lloyd’s

Ark Syndicate Management Ltd

30 Fenchurch Avenue

London EC3M 5AD

D: 020 3023 4062 M: 07950 832542

simone.streidl@arkunderwriting.com

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