www.canopius.com

Offshore Wind – Underwriting Challenges

Frankfurt – April 21st 2015

Maarten P.J. Mulder MSc. Eng.

Who is Canopius?

Canopius is the global specialty lines platform of Sompo Japan

Nipponkoa Holdings Inc., which has over $90bn total assets.

Canopius is wholly owned by Sompo Holdings’ principal

subsidiary, Sompo Japan Nipponkoa Insurance Inc., an A+ rated

company and one of the top three Japanese P&C insurers.

Canopius Syndicates 4444 and 958 offer strong financial

security, sharing the Lloyd's market Insurer Financial Strength

ratings:

– A+ (Strong): Standard & Poor's

– AA- (Strong): Fitch

– A (Excellent): A.M. Best.

Canopius at Lloyd’s

Source: Lloyd’s annual report 2013

Canopius is the ninth largest managing agent at Lloyd’s with £1bn of written premiums

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Renewable Energy team

Operating out of Amsterdam

Team of 6 specialists with over 50 years of combined underwriting experience in this specialty insurance field

Track record with over 40 offshore wind projects, including:

• Butendiek

• Dolwin I

• Amrumbank

• Baltic I and II

• Global Tech I

• Borkum Riffgrund

• Borkum West

• Nordsee One, …

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Where we are today

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What will be coming up

2015 will see Germany overtake the UK in annual grid connected

capacity

The largest wind farms to be fully completed will be RWE’s Gwynt y

Môr (576 MW) followed by Global Tech 1 (400 MW), both in Q1

Slump in the market in 2016, featuring a low level of wind turbines

being connected

Outside of the UK, only Germany and the Netherlands are expected

to bring capacity online in 2016 with DONG’s Gode Wind and

Westermeerwind

Further in the future some 26.4 GW offshore wind farms are

consented in Europe and future plans for offshore wind farms total

more than 98 GW

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Industry Challenges

Link-up to the electrical grid, power transmission issues, supply and demand

Finance issues. Without comprehensive insurance protection, investors will not provide

capital for these projects

Regulatory issues / public acceptance

Levelised Cost of Electricity (LCoE) offshore

wind too high. Cost price reduction

EUR 160/MWh (2013) EUR 100/MWh

How?

• Standardisation and modularisation

• Emphasis on new technologies, new construction

methods, high level of R&D

• Focus on economies of scale

• Increase competition

Life time expectancy, extension and decommissioning

• Warranted life-span of about 20 years. Realistic?

• Leases awarded for offshore sites will last for 50 years: life time extension?

• End of the lease period: decommissioning? How?

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Underwriting Challenges

Ageing windfarms: expiring manufacturers warranty

Increasing turbine models and sizes

• Prototypical character vs proven technology

• Larger offshore equipment needed for transport, erection and repair

very comprehensive insurance cover including:

• CAR incl. LEG3, full guarantee maintenance, DSU, Marine transit and DSU, long policy periods,

long indemnity periods for BI (overstrained production capacity, limited spare parts and vessel

availability)

lack of PML/MFL understanding: no historic data to validate models

Accumulation of risks vs availability of insurance capital

• Increasing project size up to 1,250 MW (EUR 4.5bn)

• Contingent Business Interruption (suppliers/customers)

• NatCat exposure cumulation: Northsea windstorm

Industry still not fully mature: relative high loss

frequency and severity – some examples

8 Source: 4C Offshore

CAR - claims

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CAR claims

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Some Cable Loss Statistics

Average claim cost: EUR 2,5m

Inter-array cable damage: EUR 1,4m – 4,2m

Export cable damage: EUR 8m – 27,5m

Vessel costs: EUR 100k – 310k p/d

95% of construction projects have experienced cable claims

Main root causes: poor workmanship/design and mechanical damage

Cable claims – some examples

11 Photos courtesy of Lloyd Warwick International (London) Ltd.