POWER AND ENERGY

Leading energy provider enlists The Lion Partnership to assess their long-term insurance advisors’ performance.

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Background

A major publicly listed company operating in the Power and Energy space engaged The Lion Partnership to help test the adequacy of their insurance arrangements.

While not dissatisfied with the performance of their incumbent broker, it had been many years since they last tested the market, and as a listed company, they felt it was important to revisit what was in place after experiencing some unfavourable renewal results in the preceding two years.

Approach

Following an initial round-table discussion to workshop potential strategies with the client’s key executives, it was agreed that our Statement of Capability (SOC) tender management service would be the best course of action.

This appealed to the client for several reasons. Firstly, it allowed them to engage with multiple suitability qualified insurance brokers and capitalise on their knowledge, market intelligence and technical input to measure the quality of their insurance program.

Secondly, the client would not be forced to change from their incumbent broker to benefit from the SOC process. The client was able to tap into the expertise of the competing brokers while positioning themselves to retain their long-term broker (if they elected to), who had developed an intimate knowledge of their business throughout their many years of working together.

Lastly, they saw it as an excellent corporate governance exercise demonstrating that proper due diligence had been carried out in managing the company's insurable risks to shareholders, board members and senior executives.

Solution

Each broker submitted proposals of the highest standard, with detailed analysis and observations surrounding the clients insurance strategies. As a result, numerous weaknesses within the program were exposed, accompanied by solutions to correct existing deficiencies.

Importantly for the client, all of the brokers managed to showcase their ability to think outside the box and identify a number of innovative solutions that could help the client manage their insurable risks more efficiently and cost-effectively. Several innovative solutions were proposed to give the client more significant influence and control over their insurance strategies, ranging from offshore mutual discretionary funds that were set up specifically for Oil, Gas and Power entities to various alternative risk transfer vehicles such as Captives, Protected Cell Captives, and Parametric Solutions; among others.

Ultimately, the client moved away from their long-term provider and appointed a new broker who delivered a vastly improved insurance program. They also managed to break the cycle of the year on year pricing increases that the client had experienced in previous years at a time when many of their peers (according to market research) were experiencing increases of 10% - 15% on average across their insurance programs.

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