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$100mn+ 'mega claims' account for 50% of insured power losses

So-called 'mega-claims' are now a common occurence in the power (re)insurance market, with almost half of the $9.85bn total loss recorded over the last ten years the result of just 16 claims.

According to Willis' executive director of energy, property and casualty claims, Neil Thomas, $100mn+ claims accounted for a total of $4.2bn of losses from 1998 to 2009-to-date.

Speaking at the London Power Forum - hosted by AIG, Travelers, AEGIS London, Catlin and Torus - Thomas highlighted the fact that power is now subject to large loss events, even though it has long been the received wisdom among power underwriters that the sector is characterised by high frequency, low value claims.

"We do have $100mn+ claims, and they happen fairly frequently," he said, adding that it is "imperative" that the industry shares its loss information.

"Fire was by far the most costly for insurers," Thomas said, adding that half of the sixteen power 'mega claims' were caused by fires and explosions, with flooding, collapse and breakdown accounting for the rest.

The most recent 'mega claim' came in the form of the RusHydro explosion in August which saw Russia's largest hydroelectric power plant halt production. According to Thomas, the $200-300mn in insurance purchased by RusHydro "almost certainly won't be enough" to cover the final cost.

As previously reported by our sister publication, Inside FAC, the primary placement for the property cover, for plant owner RusHydro, was placed with Allianz subsidiary Rosno on an all risks basis, with the event limit under the contract amounting to $200mn, according to Alexander Gulchenko, Rosno deputy CEO.

However, Munich Re looks likely to pick up the bulk of the claim, after Gulchenko added that risks under the contract "are reinsured in the international market, mainly with Munich Re". Hannover Re also is also facing a EUR12mn share of the claim.

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