Hot Topics: Fireman's is Windmilling

Fireman’s Funds' John Barnwell has got a gleam in his eye and it is mostly green. The New York-based vice president and ocean cargo product executive has made it a priority to expand the company’s business in Delay-in-Start-Up coverage.

DSU, as many of us may know, is coverage should a manufacturer or some other entity fail to realize the income it had planned for due to delays in the delivery of the parts needed for a particular enterprise. The niche seems to expanding and becoming attractive at this time for several reasons.

The establishment of an ever-increasing global supply chain being one of them, and the tendency of U.S. companies to locate manufacturing facilities and other pieces of their operation overseas being another.

In particular, Barnwell and Fireman’s are focusing on those alternative energy projects that companies across the globe are getting into in the race to outrun the global warming that many say is the chief threat, not only to our economy, or human civilization, but much of the rest of the planet.

As global energy companies construct wind farms, nuclear power plants, coal refuse plants, ethanol plants and solar panels as fast as they can make them, they are increasingly exposed to the risks that the parts they are ordering from around the planet might not arrive quickly enough for the plant or project to produce revenue in the timeframe that its investors need it to.

“Obviously the wind farm aspect of it is attractive to us. That’s green, that’s kind of what we’re trying to do, Allianz (Fireman’s parent) is trying to do that too. So, yeah there are a lot of projects that are happening now even though the economy is constraining. And this is a global play, it’s not a U.S.-only, this is people who have projects in the Far East, the Middle East, anywhere.”

Anywhere and everywhere, that’s where Fireman’s wants to be in DSU, helped by capacity from its German parent, Allianz AG.

“So this is an area that we are going to expand into and kind of rejuvenate and say now we are a market and we can offer $100 million of capacity which not many other players can really do.”

Although Fireman’s has U.S. competitors in this business, most notably AIG and Liberty Mutual, Barnwell says this type of business has traditionally been something found in the London market, not the U.S. and certainly not traditionally with Fireman’s Fund.

“What historically happened with this type of business was that it would go to London because they could build huge capacity for the coverage. The U.S. market is not so much a quota-share market where everybody signs and takes a piece, it’s more of a ‘Hey I’ll write the whole thing.’ The London market is more like everybody takes their little piece and you can build huge capacity, so a lot of U.S. business would migrate over to the London market. And the London market is good at this, but most of them don’t have the in-house loss prevention team that we do. So our thought was this is a niche that isn’t as affected by the soft market and we have all of the ingredients to do this.”

In a soft market, Fireman’s, like many, is looking for places to expand business without damaging profitability and DSU is Barnwell’s pet project.

“It’s pretty exciting. If I had to categorize which of my initiatives I wanted to push from a marketing and also from growth potential this year, this is it. There is other stuff that we have that we’re working on but this is the one that I could see has the biggest payoff,” Barnwell said.

Fireman’s parent company Allianz is doing all it can to get in covering green building and other earth-friendly projects, according to company spokesman Atle Erlingsson, who joined Barnwell and I on a day when those very ocean-going carriers Barnwell works to insure plied the bay behind the San Diego Marriott Hotel and Marina.

Barnwell says projects like wind farms have big exposures to startup delays, and with the growth in alternative energy projects worldwide, the premiums might line up in sizable quantities.

“You’re not talking about $50,000 premiums, you’re talking about premiums that could get upwards of seven figures. You could have big chunks of premium, big exposures, but big chunks of premium depending on the size of the project.”