Filed Under:Agent Broker, Commercial Business

Chubb’s Amy Ingram on Wind-Turbine Manufacturing Risks

Installed global-wind-power capacity is expected to more than double by 2016 from 2010 levels

Amy Ingram, the Tampa, Fla.-based vice president and worldwide clean tech segment manager for the Chubb Group of Insurance Cos.
Amy Ingram, the Tampa, Fla.-based vice president and worldwide clean tech segment manager for the Chubb Group of Insurance Cos.

Installed global-wind-power capacity is expected to more than double by 2016 from 2010 levels.

Such massive and global expansion of demand for wind turbines is good news for manufacturers. But naturally these manufacturers, whether large original-equipment manufacturers (OEMs) or smaller component-parts producers, also face a number of risks which can cripple a company lacking the proper coverage, says Amy Ingram, the Tampa, Fla.-based vice president and worldwide clean tech segment manager for the Chubb Group of Insurance Cos.

A key measure manufacturers can take to mitigate those risks: detailed design specifications, including a clear understanding of which party is responsible for developing them, Ingram says.

 “With thousands of component parts in each turbine needing to work seamlessly with one another, manufacturing processes must be precise, or manufacturers may find themselves facing a liability lawsuit,” she says.   

To protect itself from liability, the component-parts manufacturer should thoroughly document and contractually agree upon all of the OEM’s product specifications and performance requirements. Purchase orders alone likely would be insufficient, Ingram says

 Ingram also maintains that a component manufacturer must have a robust quality control/quality assurance program in place. “Quality certifications such as ISO 9001 should be considered a starting point.”

In addition, a component-parts manufacturer’s core competency should align with the work the OEM wants it to perform, Ingram says.  “For example, a large metal worker that traditionally fabricates parts for ships may have the appropriate skill set and facility to build the large flanges that bolt wind-tower sections together.”

Ingram also recommends a  business-contingency plan in case a disaster prevents it from fulfilling its contract obligations. 

 One of the biggest risks that large, utility-scale wind turbines face is susceptibility to damage from wind and other weather. 

“This is why it’s so important to understand who is responsible for what when it comes to the design specifications,” Ingram says. “Contracts that rely on the component manufacturers to make engineering decisions on issues like safety factors place far more accountability on the little guy.  This is why the proper indemnifications must be spelled out and component manufacturer should obtain signoff from the OEM before parts are produced.”

 The wind-turbine innovator is expected to assume the responsibility for design work, unless spelled out otherwise contractually with suppliers, she says. 

OEMs, though, have significantly reduced the frequency and severity of weather-related and structural-fatigue losses that had been associated with utility-scale turbines and now police themselves with proven industry standards and use real-world testing facilities such as the Wind Turbine Testing Center in Boston, she says.   

At the same time, improvements in the turbine's system control and data-acquisition intelligence can help prevent the damage before it occurs.  “These improvements, coupled with vigilance around maintenance and inspections, will continue to help reduce the frequency and severity of claims,” Ingram says.

Small, Site-Specific Wind Turbines

Meanwhile, an increasing number of smaller, site-specific, turnkey wind turbines also are being developed, and these pose different risks for turbine manufacturers, according to Ingram.

 These units could be located onsite, for example, at a farm or a school, which could create safety and liability issues. “To help minimize the risk, the overall turbine design, as well as the specific component parts should go through a robust testing and quality-auditing process before they are commercialized and sold,” Ingram asserts.

 Skipping that “prototype phase” and rushing to market misses an opportunity to catch potential problems before a system goes into operation, when a failure could prompt customers to demand the removal of the turbine and a refund, Ingram says.

Wind-turbine manufacturers also should be protecting themselves when providing installation advice or acting as the so-called “paper general” contractor while the installation is performed by a hands-on general contractor or sub-contractors under the manufacturer’s control, Ingram says.

“For instance, the wind-turbine manufacturer should consider having certificates of insurance with adequate limits for the project engineer, the hands-on general contractor, all subs underneath the GC and the project/asset owner/landlord,” Ingram says.

The manufacturer also should insist on being named as an additional insured by the hands-on general contractor or all sub-contractors if the manufacturer acts as the direct GC, she says.

“And, we can’t emphasize enough the importance of indemnification agreements that contractually spell out who is responsible for what activities,” Ingram says.

The availability of insurance for both OEMs and smaller component-parts producers is driven by those companiess'  experience, quality control, testing and contract management, Ingram says. 

"Specifically for turnkey wind-turbine companies, there is always the risk that the turbine does not meet the planned electric production outlined by the company. This pure business risk is challenging to insure and may not be available in the standard insurance market," Ingram says.

Ingram observes that the question is not whether  these companies can obtain insurance. Instead, she says, it's whether these global operations are being "serviced appropriately and protected adequately" by their insurers.  

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