Using a captive insurance company as a third line of defence, behind a risk engineering programme and the legal side and contracts, has helped drive the company forward, according to Andrew Baillie, programme director of global insurance of the AES Corporation.
Speaking at the ‘future-proofing your captive’ session at the Vermont Captive Insurance Association (VCIA) 2018 Annual Conference, Baillie used a football goalkeeper analogy to further expand on his point.
He said: “If you’re the third choice goalkeeper going to the World Cup, you are going to have a nice time, sitting in the stands and watching all the games but not doing much–that is what I want to do as a captive insurer.”
“The first goalkeeper is our risk engineering programme, who is going to do the bulk of the work, if something happens there then we rely on our second goalkeeper, the legal side and our insurance contracts, to ensure we are not accepting risk beyond what we want to.”
“If all of that fails, you then you call up the third rate goalkeeper off the bench, the captive, and say it’s time for the insurance policies to respond.”
“Doing that rather than buying insurance and hoping for the best is really what has helped us to drive what we are doing.”
The AES Corporation is a global power organisation that currently operates two Vermont-based captives, AES Global Insurance Company, which was formed in 2002, and Miami Valley Insurance Company, which was formed in 1986 but was inherited by the company in 2011 as part of an acquisition.
AES Corporation’s mission is to improve lives by accelerating a safer and greener energy future, and Baillie explained that many of the challenges in the energy risk market are caused by the shift toward greener energy.
He commented: “Currently there is a lot of social, political and economic lobbying pressure because everyone thinks energy companies are bad.”
“There are a lot of lobby groups putting pressure on insurers and a number of insurers have made statements, AXA have said they will no longer insure coal operators and, Swiss Re recently said that companies have to be showing that you are moving away from coal.”
“More recently Munich Re made an announcement that they have set a threshold that unless a company can get below a certain percentage of coal within your fleet they will not insure them.”
“The energy industry is in a period of rapid transition and change as we move toward renewable types of energy.”
According to Baillie, companies in the energy risk market faced the challenge of finding a balance in meeting their stakeholders’ expectations.
“You have to find a balance between being socially responsible with you’re doing and meeting the stakeholder requirements to be profitable.”
“The real challenge is balancing the green of the environment with the green of dollars.”
