As is the case with the majority of the energy-utilities industry, UNS Energy Corp.'s P&C risk portfolio is balanced between casualty risks from the operation of high-voltage electricity and property exposures stemming from multibillion-dollar power-generation facilities. These property risks are insured by FM Global.

On the property side, UNS has sustained several losses in the range of $3 million to $8 million in the past five years due to a series of destructive weather events that included a 2007 flood near its service-center office in Tucson that caused UNS' largest property loss of the decade—affecting its call-center, risk-management, human-resources and payroll departments. (The company has since moved all corporate functions into a new office in the city's downtown area.)

In addition, in recent years UNS sustained significant losses caused by mechanical failures of transformers and other heavy equipment—leading its property insurer to advise that its current premium rate was no longer sustainable.

“We couldn't blame our insurer, so we worked together on a reasonable solution, including a premium rate increase over a 19-month period starting with an increase of just over 10 percent this year,” says Karl Zimmel, UNS' manager of risk-management services.

“We are doing everything we can to reduce the impact of losses to our insurer,” says Zimmel, “including seeking subrogation opportunities from other responsible parties and enhancing our loss-control programs to reduce the likelihood of future losses.”

These loss-control methods sometimes mean expending more capital on equipment upgrades, he adds, which lead to fewer property claims down the line.

Special Reports /

Despite Protections, P&C Losses Lead to Higher Rates

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