Del Duvall runs AIU Energy group's worldwide
effort to provide energy operations and investors with property coverage.
For those not familiar with the insurance giant,
American International Group, Inc. (AIG) has emerged as a leading US-based
international insurance organization and among the largest U.S. underwriters
of commercial and individual insurance. With its corporate roots based
in Asia, its member companies write property, casualty, marine, life and
financial services insurance in approximately 130 countries.
Until 1993 various AIG member companies serviced
the power generation sector somewhat independently. "At the time
we had a number of units within AIG servicing the domestic market, each
with varying degrees of success. With the energy industry having developed
to a more international business with more sophisticated insurance needs,
we felt consolidating into one industry specific unit--AIU Energy--would
be the best way to address the entire market," states Duvall. "To
date it is still growing!"
Duvall has the confidence of AIG's top echelon
to accomplish the task. With a long career in underwriting for utilities,
Duvall has applied that experience to energy business as a whole. In that
role, he faced the fundamental questions that many service companies confront
in this global age: how does one of the world's preeminent service firms
follow operating companies into a worldwide market? Its clients-oil and
gas producers and refiners, oil and gas exploration and development companies,
engineering companies and non-governmental financial institutions, have
all gone forth into a risky world.
He rightly believes the "De-regulation
in the U.S. will produce major changes and the players will re-focus their
attention on new problems and issues. It will significantly effect the
insurance underwriters and their view of the business. Public utilities
can pass risk back to the rate base. Under deregulation and competition
they will not be able to do that. And therefore the insurers view of the
underlying risks must also change."
Duvall also notes that AIU has unbundled its
engineering services. "Many insurers want to send their engineers
to the plant once a month. Rather than as a benefit though, many utilities
view the presence of the insurer's engineers as a subtle form of commercial
harassment as the utility engineers feel they know more than the insurance
engineers. With AIU, if the utility wants, we will limit our engineering
visits to get only enough information to meet our underwriting needs."
AIG expanded its business from the Far East to
Latin America. In today's terms Duvall sees "Latin America as one
of the top growth areas in the world today - equivalent in many respects
to China and Southeast Asia. We are really focusing on Brazil, Argentina
and Chile."
The availability of natural gas in South America
and the continuing emphasis on privatization will drive these changes.
As he says "The new gas pipelines now under construction in the Mercosur
region will provide huge new opportunities for utilities. And the availability
of private capital will make it all possible." From his own business
perspective, he quickly adds, "Underwriters will have to maintain
and even increase their flexibility and invent new approaches in order
to meet successfully worldwide coverage demand.
Duvall describes the AIU power generation customer
as "having large to medium sized plants. Clients are from across
the board. Some clients are just getting off the ground. Some have been
in the business for nearly 100 years." He adds, "The majority
of our customers come to AIU and say 'We are thinking of purchasing a
position in a privatized company in XYZ country.' As a result, the investor
has us involved from the very beginning." AIU offers a continuous
policy that insures construction, testing and start-up. It is important
to note that coverage is continuous but the underlying contracts change
so as to achieve the proper exposure.
There are areas for new products. Changes in
customer needs have altered the traditional property and casualty insurance
markets. In many circumstances these changes have added risks for which
the client will need help in developing either funding or finite risk
alternatives. The insurer will have to step out of the usual underwriting
box and address some of these non-insurance industry issues. Or he will
lose out to the banking industry.
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