Our Knowledge, Your Power

Next Steps for Offshore Wind – Underwriters Perspective

Jonny Allen, Offshore Underwriter September 21st, 2015

Agenda

•  Size of the prize

•  Introduction to GCube

•  Underwriting New Technology

•  Project Risks

–  Loss Expectancy, Large Market Losses, Decision Making,

Serial Defect

•  Offshore Wind Claims

•  Future thoughts, questions

Offshore Wind – the opportunity

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Introduction to GCube

•  Lloyd’s Underwriting Agency providing Renewable Energy insurance since 1994, offshore since 2007

•  Underwrite 58GW Wind; 8GW Solar worldwide •  $500m in A+ rated underwriting capital •  $300m in claims paid to date

Offshore Credentials •  $540m underwriting capacity •  46 Offshore Wind Projects •  18 wave and tidal projects •  Clients: Major European utilities & IPPs •  Innovative approach

Underwriting New Technology

•  Detailed technical due diligence required •  Similar to Owner/Lenders Engineer •  Focus on:

–  Financial Strength of Division/ Company –  Engineering Team –  Design Development History –  Technology –  Manufacturing Facility –  Site Quality Systems –  Project Site Responsibilities –  Type Certification –  Maintenance Programme –  Change Management –  Retro-fitting and Correction Simulations –  Risk Management

Project Risks: Loss Expectancy

FREQUENCY

SEVER I TY

Project Risks: Decision Making

Gemini offshore substation installation, June 2015

Project Risks: Large Market Losses

•  Project: Alpha Ventus •  Owners: E.ON, Vattenfall, RWE & EWE •  Distance offshore: 45km •  WTG: Areva Multibrid M5000 •  No of WTGs: 6 WTGs affected •  Nature of Loss: Defective component of sliding bearing

leading to temperature spikes in nacelle •  Root Cause: Gear supplier, Renk (MAN ag), switched the coating material used

from zinc to an aluminum-zinc alloy that expands twice as much as zinc

•  Action Taken: Replacement of sliding bearings in 6 nacelles back onshore •  Jack Up Barges: JB114 and Sea Worked •  Cost Overrun: Approximately EUR 25 million •  Schedule execution: 8 month delay

*Poor weather led to additional cost overruns and schedule slippage on this Project.

Project Risks: Serial Defect

A Pioneering Example?

Vertical integration:

• Design problems • Production errors • Equipment obsolescence • Supply chain strategy • Transmission line harmonics • Fraudulent accounting allegations….

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Offshore Wind Claims 2007-2013

GCube paid claims to date > USD 70m Cables, Grouted Connection – Insurance.

Cost Overruns – the Industry. Developer cost = 4 times this? 5 times this?

What’s next?

•  Diversity of markets, geography, technology •  Supply chain opportunities •  Nat Cat exposures

The £310m re-development of the dock will create 1,000 direct jobs at the plant with production expected to start late next year.

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INDUSTRY CHALLENGES

Our Knowledge, Your Power

Next Steps for Offshore Wind – Underwriters Perspective

Jonny Allen, Offshore Underwriter September 21st, 2015

Thank you