POWER March 2017 - 48

MANAGING RISK
New and Improved Insurance
Offerings Provide Power Plants
with More Options
Risk is inherent in all businesses, but power plants face unique perils that require
the right protection. Property and casualty insurance may not be
enough; equipment breakdown, business interruption, weather risk transfer,
and cyber coverage are just a few examples of insurance that may
also be worth considering. The right coverage could mean the difference
between success and failure.
Aaron Larson
I
nsuring a power plant is quite a bit different
from insuring a car or truck. Sure,
your Allstate or State Farm representative
may check your car for pre-existing damage
before initiating coverage, but in my experience,
no agent has ever performed routine
inspections of my vehicles or offered engineered
solutions to make them safer or more
reliable. In fact, I suspect my auto insurance
agent knows much less about automobiles
than I do. For the most part, if a vehicle is
legally registered, the insurer will write you a
policy and gladly take your money.
Insurance companies that specialize in
power plant policies are much more proactive.
They often have a unique understanding
of the systems and components installed in
facilities, and they recognize the perils faced
by the technology being used. Most of the
power plant insurance representatives who
visit sites are not just salespeople, but often
full-fledged engineers with the knowledge
and experience to make valuable recommendations.
They visit many different facilities
and have a database full of claim information,
allowing them to share best practices
and catch little things that could lead to big
problems.
A History of Risk Reduction
The theory behind the process lies in the
belief that most losses can be prevented. If
appropriate actions are taken to mitigate hazards
and reduce risk, the likelihood of a claim
decreases, and that's good for everyone.
It's not a new idea. A textile mill owner
named Zachariah Allen, for example, formed
FM Global (originally known as Factory Mutuals),
back in 1835. In an effort to reduce the
risk of fire and increase his mill's resiliency,
Allen made various property improvements.
48
1. All aboard! This locomotive's boiler exploded on December 2, 1898, in Brisbane,
Queensland, Australia. Boiler explosions were a fairly common occurrence in those days. Courtesy:
State Library of Queensland
However, when he asked his property insurance
company to decrease his premiums to
match the reduced risk, it refused. So Allen
recruited other mill owners who shared his
philosophy, and they created their own mutual
insurance company. Today, more than a
third of Fortune 1000 companies partner with
FM Global for at least a portion of their insurance
needs.
" We're a property insurance company. We
don't do the casualty, the liability, or many of
the other lines of insurance that are out there, "
Mark F. McAdams, high-hazard occupancy
specialist for FM Global, told POWER during
an interview. " We do one thing and we do
www.powermag.com
it right. We address property exposures, and
we help our clients reduce their exposure to
loss-reduce their overall cost of risk-by
sending engineers out to the facilities and
focusing on practical solutions to reduce the
chance of loss as well as the potential severity
of the loss. "
There are other insurance companies with
similar philosophies. Hartford Steam Boiler
(HSB)-a 150-year-old business-has a history
that is just as interesting as FM Global's.
When HSB was founded, the light bulb had
not yet been invented, but boilers were everywhere
nonetheless. Steam was used to power
boats, locomotives, and industrial machines.
POWER | March 2017

http://www.powermag.com

POWER March 2017

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