Collaborative Energy – A Case Study - AEGISlink

7/18/2012

Collaborative Energy – A Case Study

Anthony J. Calega

SVP, Loss Control Services
AEGIS Insurance Services, Inc.

Collaborative Energy – A Case Study

• Steve Lloyd Program Manager of Corporate Insurance
at TVA

• Gary Hawk Senior Underwriter at AEGIS
• Jim Mintel National Machinery Supervisor at AEGIS
• Tom Clark Managing Director at Marsh

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7/18/2012

Collaborative Energy – A Case Study

Steve Lloyd

Program Manager, Corporate Insurance
Tennessee Valley Authority

Collaborative Energy – A Case Study
The Member Perspective

Who is TVA?
• Origins and history
• TVA footprint
• Generation

− Type
− Capacity

• Transition to modern utility

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America’s Largest Public Power Provider

The TVA Power Service Area

• Wholly-owned US corporation Kentucky
• Profit-neutral, self-funded
• AAA/AA+/Aaa ratings Virginia
• 9 million area population
• 155 muni / co-op distributors Tennessee North Carolina
• Various direct customers
• 80,000 square mile service area Mississippi Georgia
Alabama
(covering parts of seven states)

America’s Largest Public Power Provider

The TVA Power Service Area

• 37,300 MW power capacity Kentucky
• 168 billion kWh sales
• $11.8 billion annual revenues Virginia
• $46.4 billion total assets
• 12,893 employees Tennessee North Carolina

Mississippi Georgia
Alabama

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Competitive Asset Base –
Power System Diversity

2011 Total Power Supply Power Capacity

(171 billion kilowatt-hours) (summer dependable)

16% Megawatts
4%
7% 44% Coal-fired 13,807 37%
18%
Nuclear 6,691 15%
22%
Hydro 5,443
8%
Natural Gas 8,237 100%

Contract 3,122

29% 37,300

Coal-fired Nuclear
Hydro Natural Gas
Renewable < 1% Purchases

Collaborative Energy – A Case Study

Gary Ladman

Vice President, Underwriting
AEGIS Insurance Services, Inc.

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The Property Underwriting Perspective
TVA / Marsh / AEGIS Property Relationship

• AEGIS was first approached by Marsh to help develop
an all risk property insurance program for TVA in 2002

• Approached again in 2003 and in 2004; still did not feel
comfortable committing capacity

• In 2005, the effort was successful: AEGIS wrote a
significant share of a large QS program, instrumental
in bringing along the following markets
− All markets required higher deductible than TVA desired
− AEGIS and AIG both required loss control engineering
involvement

Collaborative Energy – A Case Study
The Property Underwriting Perspective

• Why did it take so long, why require AEGIS Loss
Control engineering, why all the scrutiny?

− 13,800 MW coal fired, @ 60 units, 1951-1973
− 5,400 MW hydro, @ 110 units, 1909-1971
− 8,000 MW CTG, @ 95 units, 1971-2003, > 2,000 MW

recently added
− Understanding the technology and machinery

risk is vital
− Successful leading underwriting companies have

a strong commitment to loss control engineering

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Collaborative Energy – A Case Study
The Property Underwriting Perspective

• Since 2005, AEGIS has remained a leader in
the TVA’s program

− AEGIS has committed leadership capacity, and we
have favorably responded to the challenges faced

− Loss control engineering effort involves AEGIS, TVA,
and Marsh

− All following markets have confidence in the results
− Significant commitment of capital, time, and effort

within TVA from the top down
− This collaborative effort has produced better than

expected results

Collaborative Energy – A Case Study

James Mintel

National Machinery Supervisor
AEGIS Insurance Services, Inc.

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7/18/2012

Collaborative Energy – A Case Study
The AEGIS Loss Control Perspective

• Provide support to Underwriting!

− Assessments commenced in 2006
− Loss Control to provide property and machinery

breakdown assessments

• Marsh Risk Consulting present for all assessments
• 52 locations and a multitude of technologies

− First insurance company to provide this service
in TVA history

Collaborative Energy – A Case Study
The AEGIS Loss Control Perspective
• Assessment results from 2006 through 2009

− 201 assessments completed

• Carried over many if not all of Marsh recommendations
• 2.3% of all risk reduction suggestions were closed
• 42% of all risk reduction suggestions were designated as

high priority
• 97.7% of all risk reduction suggestions remained open

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Collaborative Energy – A Case Study
The AEGIS Loss Control Perspective

• The need to organize the collected data became
apparent

− Prioritize risk reduction suggestions

• Likelihood & severity of loss considered
• A portion of risk reduction suggestions were placed

in abeyance

− Quarterly engineering meetings initiated at TVA
headquarters

• TVA, Marsh & AEGIS present
• Others joined as progress was made

Collaborative Energy – A Case Study
The AEGIS Loss Control Perspective

• Assessment results from 2006 through 2012

− 309 assessments completed

• 22% of all risk reduction suggestions have been closed
• 43% of all risk reduction suggestions were designated as

high priority
− 54% of the implemented risk reduction suggestions
were high priority

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Collaborative Energy – A Case Study

Thomas Clark

Managing Director
Marsh Risk Consulting

Collaborative Energy – A Case Study
The Broker Engineering Perspective

• Initial opportunities for program development
• Collection of engineering data for market submission

− Marketing reports – property and machinery
and equipment risk

− Technical data gathering process
− Meetings with generation groups, corp. engineering

and design, plant management and supply chain
• Market selection – AEGIS lead market – engineering

services

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Collaborative Energy – A Case Study
The Broker Engineering Perspective

• Development of inspection protocols
− What facilities to survey and when – least impact on
plants (outages, etc.), education of local plant teams
− Coordination of schedules for plant visits
− Site notification process and information requests
− Report review, distribution, and follow up

• Advancement and education of industry practices into
TVA culture
− AEGIS engineers – lessons learned, code
interpretations and requirements – technical resource

The Broker Engineering Perspective
Evolution of Program and Benefits

• Functional inspection services program (going into
seventh year) shared with all insurance program
participants

• Quarterly engineering / underwriting meetings

− Risk prioritization – action and resolution plans
− Industry trends / topics
− Participation – TVA risk management, engineering

groups, business unit reps, other insurance program
participants

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The Broker Engineering Perspective
Evolution of Program and Benefits

• 2011-12 focused attention on priority 1
“risk reduction suggestions” – completed – 68

−Emergency organization – 5
−Impairment handling – 26
−Housekeeping – 19
−Fire protection system testing – 18

• 2011-12 “no new risk reduction suggestions”

The Broker Engineering Perspective
Evolution of Program and Benefits

• COO loss prevention program assessment completed
by Scott Madden in April, 2010

• TVA fleetwide fire protection program assessment
( Kleinsorg Group Risk Services)

• TVA fire protection staffing additions –
FP group, COO group, river operations

• Pressure vessel testing program – river operations
• Combustible dust program and housekeeping awareness

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The Broker Engineering Perspective
Evolution of Program and Benefits
• Cumberland Fossil Plant – fire protection program and

equipment upgrades

− Fix-it-now FP maintenance team established in Fall,
2010 (four people)

− Restored / repaired all fire protection system
Impairments

− 2011 expended $1.6 million in fire protection system
upgrades

− Additional $200,000 expended on transformer fire
protection system upgrades

Collaborative Energy – A Case Study

Steve Lloyd

Program Manager, Corporate Insurance
Tennessee Valley Authority

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7/18/2012

Collaborative Energy – A Case Study
The Member Perspective

• Creation of risk management group
• Long term partnership
• Enterprise-wide operational risk assessment
• Challenges of creating an integrated insurance

risk program
• Initial insurance market opportunities

Collaborative Energy – A Case Study
The Member Perspective

• Partnership with Marsh and AEGIS
• Foundation of the program
• Initial development of relationships internally
• Coordination and communication of data
• Benefit of program to TVA

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7/18/2012

Collaborative Energy – A Case Study
The Member Perspective

• AEGIS Loss Control team
• Partnership formed
• Resource network benefits to TVA
• Initial results of program

− Highlights
− Hard spots

Collaborative Energy – A Case Study
The Member Perspective

• Year one inspection results
• Recommendations

− Development and organization of suggestions

• TVA coordination
• Quarterly engineering meeting
• Benefits of partnership with AEGIS and Marsh

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Questions?

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