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Hydro plant gets new insurance coverage

The Murray Hydroelectric Plant will find itself being provided insurance coverage by a Little Rock insurance consultant following a vote of the North Little Rock City Council.

At its last regular meeting held on Feb. 25, the council awarded the insurance contract to The Holmes Organisation Inc. at a total cost of $284,000.

The council waived the competitive bidding process to award the insurance contract.

“Insurance coverage for the Murray Hydroelectric Plant is specialized coverage, and the City Council has determined through experience that the statutory bidding process does not produce economically advantageous prices for insurance on the Murray Hydroelectric Plant,” reads the ordinance.

The Holmes Organisation selected insurers AEGIS and AIG to provide the plant’s insurance.

“The mayor and city clerk are hereby authorized to enter into an agreement for comprehensive loss and business interruption insurance coverage for the Murray Hydroelectric Plant,” according to the ordinance.

The $284,000 amount is an annual premium and will be paid from the North Little Rock Electric Department’s budget.

“The proposal from AIG/AEGIS is the lowest premium available for the Hydro,” said President Eric Herget of The Holmes Organisation. “As you recall last year, we were faced with a 55 percent increase in premium from the prior insurer. We did approach other insures on the renewal. The consistent message was the expiring premium was too competitive and if our renewal was in a similar range they could not touch it.”

Another insurer, Starr Tech, offered The Holmes Organisation to provide the coverage for $432,000 in 2012. “Obviously, this is out of line compared to our renewal proposal,” Herget said.

Herget added, “The Hydro was heavily marketed last year. There were very few insurers that insure this type of facility. The property market worldwide is experiencing moderate rate increases on most risks. The hydro has a significant flood risk. Storms such as Sandy with significant surge/flood losses only reinforce to the insurance marketplace that this peril is to be avoided or sublimed to a low amount.”

Herget said the North Little Rock Electric Department has continued for the third year in a row to see a steady premium despite the gate ring ball bearing loss that occurred in 2011.

“This loss was approximately $1.5 million,” Herget said. “The Hydro has paid approximately $840,000 in premiums in the last three years. Insurers have paid almost double that in the one claim.”

Herget said insurers believe the managers of the Hydro plant are doing a good job overseeing its operation.

“One item to note is the recent loss control report provided by AIG,” Herget said. “Their inspector did not find any corrective recommendations that need to be addressed. This is not typical. In fact, I have never seen a report that didn’t have at least a few recommendations to comply with. The report notes that insurers consider the risk to be ‘good.’ To me, this means the Hydro staff is doing a good job in maintaining the plant.”

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