Swiss Re New Markets Corp. announced that it has entered into a cooperation agreement with Mirant to provide generator forced outage insurance (GFOI).
The cooperation will focus on investor-owned utilities, municipals and cooperatives with less than 2000 MWs of generating capacity, and independent power producers with less than 3,000 MWs of capacity in North America.
Volatile power markets are a major risk for power generation companies. “The threat of unplanned outages combined with increased replacement costs or lost revenue can substantially impact the financial performance of power producers,” said Dave McKenzie, director, New Business Development, Mirant. “With GFOI, power generation companies can have an added level of protection against an unexpected forced outage period.”
GFOI is triggered when a generating unit is not operating due to a forced outage or derating and the price of electricity is in excess of a defined strike price. “Companies today are more willing to explore insurance-based solutions to mitigate earnings and cash flow volatility,” said William Anderson, director and global head of SRNM’s Utility & Power Industry Practice. “This dual trigger approach provides greater efficiency than either a call option or simple outage coverage, since the probability of outage and excessive spot market prices is factored into its price.”
The cooperation between SRNM and Mirant brings together a strategic combination of insurance and power industry professionals to satisfy the needs of this important market segment. McGriff, Seibels & Williams will be marketing coverage and providing brokerage and policy services. An affiliate of SRNM will be providing the structure and substantial capacity to underwrite the risk.
This is an open cooperation arrangement. Other market participants and intermediaries can approach the SRNM affiliates for GFOI coverage provided by this cooperation.
Mirant Bermuda Ltd., an affiliate of Mirant, will be assuming a portion of the GFOI risk through reinsurance. Mirant has implemented similar coverage for its own generation, and will be providing engineering, risk management and operational advice to
Mirant Bermuda Ltd.
Swiss Re New Markets is a division of Swiss Reinsurance Company (Swiss Re), one of the world’s leading reinsurers with over 70 offices in more than 30 countries. In the 2000 financial year, gross premium volume amounted to $15.4 billion and the net income after tax reached $1.8 billion.
Mirant is one of the world’s leading competitive energy providers. Headquartered in Atlanta, the company has integrated energy operations in North and South America, Europe and Asia. A leader in energy risk management and marketing of power, natural gas and other energy commodities, Mirant has one of the industry’s largest energy commodity trading floors. We see the opportunity to change the world with our energy(SM). Come see how at www.mirant.com.
McGriff, Seibels & Williams, Inc. is a leading international risk consultant and insurance brokerage firm and is the largest independent energy broker in the U.S.
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