Transmission and distribution lines consist of pylons (Leitungsmasten), cables (electricity transmission lines, which can be either overhead or underground) and transformers that convey electricity from a generating station to a utility company’s customers. T&D lines are embedded in a grid (Stromnetz), a network of other power lines over a wide area, which supplies electricity if one of them breaks down. This reduces the risk of power cuts (also called “power outages”) and their duration if they do occur.
During construction T&D lines are underwritten within the framework of construction all risks (CAR) by property or engineering underwriters, who need to know the nature of the terrain. Is it mountainous, marshy or prone to flooding? What are the weather conditions? In remote regions expensive cables and equipment will be exposed to theft. If loss of earnings due to a delay in start-up (DSU) is covered, it will be difficult to estimate the exposure due to the functioning of the grid. After construction has been completed, in the operational phase, TD lines become part of the insurer’s property portfolio.
They continue to be exposed to natural perils. Windstorms and ice can cause pylons to collapse. Flooding may undermine their structure, earthquakes and subsidence can topple them over, landslips and avalanches sweep them away. A design weakness in the pylons could cause a loss accumulation, a remedy for this being to agree appropriate deductibles and a serial clause that limits the number of units damaged by any one event. Pylons in remote places are also exposed to the risk of terrorist attack.
The public liability risk tends to increase with the degree of urbanization. However, in the US T&D lines have been known to cause bush fires, with extensive loss of life and property. And the possible damage to health by being exposed to electromagnetic radiation when living close to power lines is still an unresolved issue.
T&D insurance can play a role in a business interruption policy that includes a breakdown of the electricity supply. Such endorsements usually indemnify only damage to transformers by perils covered in the material damage policy. They do not include power outages caused by damaged power lines, for which T&D insurance is needed.
Due mainly to the high exposure, T&D lines are notoriously difficult to insure unless they are confined to the proximity of the power station, the primary…