What energy risk insurance protects
Energy facilities — power plants, substations and grids, oil and gas fields, pipelines, refineries and chemical plants, renewable energy facilities — combine high equipment values, complex technology and significant liability to those around them. Energy risk insurance brings several types of protection together in one program: property and equipment, production interruption, construction and installation of new capacity, liability to third parties and for environmental damage.
Such programs are needed by generating and grid companies, subsoil users, pipeline and storage operators, processors, developers of solar and wind plants, and their contractors and lenders. In Kazakhstan, compulsory types of liability insurance apply to owners of hazardous production facilities and to users of natural resources — they are selected together with the voluntary program so that there are no gaps or duplication.
Main risks and coverage options
- Property "all risks" — fire, explosion, natural disasters, external impact, unlawful acts of third parties.
- Machinery breakdown — sudden internal damage to turbines, generators, transformers, pumps, compressors.
- Production interruption — loss of profit and standing charges during restoration after property damage, including from damage at suppliers.
- Construction and erection risks of new facilities and modernisation; more on the construction insurance page.
- Third-party liability and sudden environmental pollution.
- Control of well, re-drilling costs and clean-up — for oil and gas production.
What is usually not covered
- wear, corrosion, erosion, gradual pollution;
- defects known before the start of insurance;
- losses from planned shutdowns and repairs;
- fluctuations in energy prices and market losses;
- business interruption without property damage, unless otherwise agreed;
- a number of political risks, cyber incidents and terrorism — without separate cover.
What determines the price
The cost is calculated individually following underwriting. Taken into account are the type of facility and technology, the age and manufacturer of the equipment, protection and automation systems, fire safety, the maintenance programme, the availability of spare capacity and spare parts, the location of the facilities and natural hazards, the loss history, the size of the retention and the limits required. For large facilities an engineering risk assessment is mandatory, and is often carried out by specialists of the insurer or reinsurer.
How to choose a program and what to look for in the contract
- Sum insured — the replacement value of the property; for production interruption, a sound calculation of gross profit.
- Limits — the overall limit per event, and sublimits for natural disasters, breakdowns and debris removal.
- Retention and deductible — monetary or time-based (in days of downtime), as well as the retention of the group of companies.
- Indemnity period for production interruption — taking account of lead times for unique equipment.
- Territory and list of facilities — including transit and temporary storage.
- Placement terms — the share of local insurers and the reinsurance market, and lenders' requirements.
What to do if an insured event occurs
- Stop the development of the accident and ensure the safety of staff and the public.
- Notify the insurer, the broker and, if necessary, government bodies.
- Record the damage and preserve the control system data and operating logs.
- Agree with the insurer and the claims adjuster a restoration plan and temporary measures.
- Collect documents on repairs and on financial losses from downtime.
How Polis Re helps
We carry out a risk analysis of the facility, prepare underwriting information, combine compulsory and voluntary types into an agreed program, and arrange placement in Kazakhstan and, through reinsurance, on the international market. We support the settlement of large losses. You can estimate the approximate cost of compulsory types in the calculators for hazardous facilities and for environmental insurance. For a comprehensive program, leave a request to the broker.