As is the case with the majority of the energy-utilitiesindustry, UNS Energy Corp.'s P&C risk portfolio is balancedbetween casualty risks from the operation of high-voltageelectricity and property exposures stemming frommultibillion-dollar power-generation facilities. These propertyrisks are insured by FM Global.

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

In addition, in recent years UNS sustained significant lossescaused by mechanical failures of transformers and other heavyequipment—leading its property insurer to advise that its currentpremium rate was no longer sustainable.

“We couldn't blame our insurer, so we worked together on areasonable solution, including a premium rate increase over a19-month period starting with an increase of just over 10 percentthis year,” says Karl Zimmel, UNS' manager of risk-managementservices.

“We are doing everything we can to reduce the impact of lossesto our insurer,” says Zimmel, “including seeking subrogationopportunities from other responsible parties and enhancing ourloss-control programs to reduce the likelihood of futurelosses.”

These loss-control methods sometimes mean expending more capitalon equipment upgrades, he adds, which lead to fewer property claimsdown the line.