Don’t let the next opportunity blow away with the wind

Without the right information, an Underwriter is fated to miss out on writing perfectly good business

You cannot be an Underwriter without eventually writing a policy which suffers a loss. It comes with the territory. But it is how you react to the loss, how you extract learnings from the incident, that will define you as a successful Underwriter or an ineffective one.

A Virtual i Technologies client – a regional insurance carrier operating in South-East Asia – was considering passing on the opportunity to renew the policy of a wind power company which had suffered a fire loss in the previous year. The carrier was insuring this company since its first wind farm was constructed in 2007, and continued to grow with them as they constructed three more wind farms over the next decade. The fire, which consumed the wind turbine nacelle (the housing at the top part of the turbine structure which contains all the mechanical and electrical equipment) and damaged all three rotor blades, had been caused by a fault within a piece of electrical equipment known as a ‘variable slip resistor’. To further complicate matters, that same wind farm had a previous nacelle fire loss two years earlier in 2019….and where did the fire start? In the variable slip resistor of course!

The Underwriter didn’t want to hang around to be third time unlucky, but they committed to the placing broker that they would commission a survey of the four wind farms before making a final decision. Enter Virtual i Technologies and our remote survey platform [VRS]^TM Virtual Risk Space. For just a fraction of the traditional survey cost, we were able to connect a wind turbine expert to the asset manager of the wind farms, whilst allowing the broker and the primary insurer to remotely sit in on the survey.

The wind turbine expert was able to quickly establish some important facts that completely altered the understanding of the inherent exposure, namely;

• Variable slip resistors only existed in four out of the 22 turbines in the fleet, as the other turbines used different technologies to control rotor speed, and these technologies (e.g. doubly-fed induction generators with frequency convertors, etc) didn’t create the same level of fire hazard.
• Those four turbines had also been idle for a long period in 2019, due to a transformer outage at the national grid operator’s local substation. The turbine manufacturer suspected that this would have allowed condensation to form on the circuitry, causing barely visible corrosion damage on the printed metal wiring, but which would have been enough to induce overheating and set the stage for a fire. The electronics in those turbines were recently inspected to remove any doubt that there was an undiscovered problem waiting to cause another fire, and – positively – each one was given the all clear.
• Perhaps most importantly, all turbines were now retrofitted with automatic fire suppression systems (using a clean agent). Before there was nothing to stop a small fire from escalating to consume the entire turbine nacelle.

To the Underwriter this meant something simple; they now had ample evidence that the exposure which had hurt them twice before didn’t exist in the majority of the asset base, and where it did exist there were now better controls to both prevent and extinguish a fire. The combination of hard market conditions and the fact that the recent loss history was off-putting for other insurers meant they could agree a substantial price increase.

An excellent result, all made possible by getting the right expert to see and inspect the asset remotely without the time delay and the expense associated with a ‘traditional’ survey.

This is not an isolated case. We recently helped an insurer in East Africa who was intending to let a long-standing client go, because their business involved importing fertilizer and the words ‘Ammonium Nitrate’ came up in the submission. Terrified that they had a Beirut-style exposure in the middle of a built-up port area, they were not only about to decline to renew for this client but had also taken steps to reduce the business they were doing in that surrounding area in order to limit their accumulation potential. Again, a quite remote survey using [VRS]^TM Virtual Risk Space uncovered that the company was in fact handling ‘Calcium Ammonium Nitrate’, a practically benign substance, and hadn’t stored it’s dangerous cousin for over 10 years. The Underwriter could reverse the revenue-destructive steps that had been unwittingly taken now that they had the necessary insight.

The list goes on. There is a saying that “assumption is the mother of all mistakes” (the funnier version of that phrase would be too impolite to state here….), and in the absence of information to support the right decisions, these Underwriters were fated to miss out on writing perfectly good business. Are you letting risks pass you by because you are fearful of the unknown? Let [VRS]^TM Virtual Risk Space change that for you, today.