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Insurance ills

The wind energy sector is going to feel the effects of the financial scars suffered by the insurance industry following last September's terrorist attack on the United States, says a specialist in wind project coverage. "We are in a very hard insurance market and it's going to have a significant impact on the wind industry and our ability to move forward," Fraser Maclachan of Miller Insurance told delegates to April's 2002 Global Windpower Conference.

To illustrate that impact, Maclachan pointed to a US wind project that recently renewed its property and machinery breakdown policy. The premium went up by 300% and the deductible increased fourfold. "That's a very difficult thing for anyone to budget for." Maclachan outlined a number of reasons for the huge jump in insurance costs, including the fact that wind power is categorised with other energy and engineering projects. That sector has seen some big losses lately, particularly with offshore oil rigs.

"If wind continues to be classified along with these other projects, something I believe is should not be, then it will continue to be dogged by poor results in other energy sectors," he said. To be reclassified into its own category, though, the global wind industry would have to be about three times as large as it is today.

offshore

With large insurance companies now closing entire departments to cover their losses, wind power developers should expect to see changes in the coverage they can expect. "I really wouldn't expect to carry on signing contracts that contain very high limits of liability or exposure you expect the insurance market to underwrite," Maclachan told the audience. "The fact of the matter is there might simply not be the capacity there to actually provide the limits or the scope of coverage you require. This is going to be especially true with the offshore sector."

Concerns were also raised at the conference about the impact of offshore projects, which carry higher risks than those built onshore, on wind insurance rates. "There are so many onshore facilities still available that I would not like to see the offshore business dominating the insurance methodology," said Klaus Rave of Investitionsbank Schleswig-Holstein in Germany.

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