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Neil Prior, Managing Director

How is the insurance market adapting to new opportunities and challenges?. Neil Prior, Managing Director. The Origin of Sciemus.

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Neil Prior, Managing Director

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  1. How is the insurance market adapting to new opportunities and challenges? Neil Prior, Managing Director

  2. The Originof Sciemus • Sciemus 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 underperformance • Sciemus takes an engineering based approach to building models and targets development where, historically, there has been an over reliance on experiential judgment and inadequate analysis • Each 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

  3. Sciemus Power • Sciemus Power have been underwriting in Power since 2008 with various companies • Neil Prior • 27 years in insurance • Broker with Marsh and JLT – Power Sector Focus • Power Underwriter at ACE from 2007-2013 • Managing 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 Commercial in Confidence

  4. Underwriting as a New Entrant • Power Insurance highlights over the last 5-10 years • Values doubling over 10 years • Deductible and sub-limit stagnation • Renewable energy increased market share • Flexibility has overtaken efficiency in the value chain • Business interruption profile changes • Investment and maintenance revised emphasis • Ageing assets • Results have shown a steady increase in attritional losses Challenging time for Power Underwriters Commercial in Confidence

  5. Power Industry Changes • Growing Renewable energy market share • General move from baseloadto 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

  6. Impact on Insurance • Deductibles have less impact on claims • Increasing claims frequency • Greater uncertainty around BI numbers and claims • Plant Loss History less indicative of future risk “The forced outage rate has increased over the last ten years even though maintenance has increased as well” EURELECTRIC, Power Statistics & Trends 2011 Commercial in Confidence

  7. Responding to Industry Change • There 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? • Data • Analysis of past performance • Predictive modelling • Encouraging data exchange between client and underwriter enables better informed decisions • Engineering know-how • Underwriting Discipline Commercial in Confidence

  8. Applying the Understanding of Risk • Leveraging 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 Commercial in Confidence

  9. Data Partners • Strategic 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 units Event data for more than 13000 years worth of operations And Growing… Commercial in Confidence

  10. 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 Commercial in Confidence

  11. 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 Commercial in Confidence

  12. ….or in others words • Wouldn’t it be great for us all if we had Security of insurance supply?

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