Unique feedstock supply chain insurance service has the potential to be an important catalyst in unlocking new bioenergy projects

Savills and R K Harrison have developed a new insurance product to support developers and operators of bioenergy plants.

Savills and R K Harrison have developed a new insurance product to support developers and operators of bioenergy plants by providing insurance against lost income arising from previously uninsurable failures within the feedstock supply chain.

According to research commissioned by the Department for Energy and Climate Change, by 2020 this supply chain will have grown to include 23 million tonnes of biomass feedstock.

If a feedstock supply chain fails, a plant has to seek alternative inputs to remain operational, potentially on the spot market, depending on timing, which can compromise its capacity to service debt or generate profits. Despite these potentially costly financial implications, traditional business interruption insurance, which covers loss of income as a result of physical damage, does not cover many of the risks a biomass supply chain faces.

Ashley Lilley, Associate Director of Savills Agribusiness consultancy, said: “Working with developers, funders and users it is very clear that, in many cases, the perception of feedstock supply chain risk has been holding back expansion and, more concerning for the industry as whole, the development of new biomass plants.”

The full supply chain insurance service incorporates insurance and risk management advice in a three phased approach:

1. A comprehensive supply chain audit, including a full risk assessment and critique of the long term management strategy.

2. Where necessary, a risk mitigation programme that protects profits, balance sheet, brand and company reputation against the significant implications of supply chain disruption.

3. Insurance with wider coverage than traditional business interruption policies.

This insurance differs from traditional business interruption insurance as it is designed to indemnify the operator for any reduction in turnover as a result of an interruption or failure in the supply chain. This means it is not reliant on an event or damage as a trigger to the reduction and can include such risks as a supplier’s insolvency or inability to provide sufficient feedstock, political risks or extreme weather events, which are all excluded under traditional insurance.

Miles Thomas, Director and Head of Operations for Savills Energy, added: “By managing the financial implications of supply chain disruption, we think this product will help with the development of new plants in the pipeline, as well as potentially opening the door to interesting refinancing options for existing operators.”

Savills plc is a global real estate services provider listed on the London Stock Exchange. Savills has an international network of more than 500 offices and associates across 45 countries throughout the Americas, the UK, Europe, Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. www.savills.co.uk or www.savills.com

About R K Harrison:

Originally founded in 1882, R K Harrison Group is the leading employee-owned insurance and reinsurance broker specialising in bespoke solutions for businesses, insurance brokers, trade associations and private individuals, both in the UK and Internationally.

R K Harrison handles over £1.2 billion (US$ 1.9 billion) of client premiums annually and is currently the sixth largest producer of direct premium income to Lloyd’s.

The Group employs over 650 staff in nine offices. In the financial year to June 30th 2012 the Group generated revenue of £92 million, a 21% increase on 2010/11 and the thirteenth consecutive year of revenue growth.

For further information visit rkhgroup.com