Member Q&A: Jamie Fleming of Axis Capital

Jamie Fleming is senior underwriter in renewable energy at Axis Capital Ltd. We spoke to him recently about his views on the challenges and opportunities for wind power - if you'd like to take part in a member Q&A, email us at editorial@awordaboutwind.com

In simple terms, what does your company do?

We provide insurance for all aspects of constructional and operational risks, for both offshore and onshore wind projects. We support companies in all aspects of their dealings from marine transit of parts through to breakdown of operational turbines.

What do you want from an A Word About Wind membership?

There have two things that we’ve found the A Word About Wind membership useful for. The first is networking at Quarterly Drinks. These events have allowed us to meet and discuss the industry with a number of different people and have also featured some very interesting speakers from companies like Greencoat, Vattenfall and Ørsted. The second has been the Financing Wind conference. We found it particularly interesting.

Of the deals you’ve worked on, which is your favourite and why?

I predominantly focus on offshore and onshore wind at Axis, with more of a focus on offshore; however one of my favourite deals was for an onshore wind risk. It was one of the first big wind energy deals I made in my career, and was for the largest wind farm in Africa at the time. The project is based in Morocco, where the intricacies of the insurance market are quite complex and different to that of the London market. Moroccan insurance regulations dictate that if an international insurer is to write business in Morocco, it’s a must be a reinsurance of the state reinsurer, who subsequently reinsure a local insurer. Add to this a broker based in London and a broker based in Morocco, and consequently there will be a number of different parts and interests that needed to be considered, including having our wording approved by the Moroccan state reinsurer. It was a time consuming process! Needless to say the deal was made, and it helped open the door for future business in the North African region.

In which markets do you see the best opportunities right now?

Of the established offshore wind markets, the UK is still leading the way in terms of installed capacity and pipeline for the next few years. There are at least five extremely large projects that are due to come online by Q4 2019, and at least 3 that are due to start construction. In addition, it’s been projected that the UK will potentially see a five-fold increase in stalled offshore wind capacity by 2030, with zero subsidy levels; expected by the mid 2020’s. Once the market becomes fully subsidy-free, we will have reached a huge milestone in terms of the industry being able to stand on its own two feet, which will only continue to help the public perception of these offshore mega-projects.

As for the emerging markets in offshore wind, we are keeping a very close eye on Asia, particularly Taiwan. Currently there is one test project there but in the current tender another 5.5GW of contracts will be awarded, many of which are expected to be with European developers that Axis are currently involved with. In addition, the US is slowly bubbling away in terms of offshore wind development. Axis are currently involved in the 2 projects there, and there is 23GW of proejcts in the planning stage around the 12 states that are involved. The US is therefore a key market for Axis in 2019 and onwards.

What is the biggest challenge facing wind and how would you fix it?

Wind energy as a whole is continuing to go from strength to strength. However, we have concerns regarding political uncertainty in particular countries that are currently developing offshore wind. This is particularly topical at the moment with regards to the French offshore market, where currently political uncertainty is arguably the greatest threat to the industry taking off there. With the Government currently reviewing whether or not they can honour the tariffs they awarded back in 2011 and 2013, due to the cost of developing offshore wind dropping per kw/h, there is now significant uncertainty in the market. As we know, uncertainty is extremely bad for progress, and will potentially halt the French market if not resolved soon. If I could fix that, I would move into politics!

Which trends will affect the wind sector most in the next 5-10 years?

Moving beyond the political risk in certain countries, the offshore wind market is moving towards subsidy-free contracts, and that will have a huge impact on the industry. We have recently seen the first non-subsidized wind farm awarded to Vattenfall for a Dutch offshore project, and expect this trend to continue. One of the risks is that as the prices continue to drop for winning these permits; will there be enough margin to make operating the project sustainable and profitable once it starts exporting electricity to the grid?

Another trend which is linked to subsidy-free contracts is the change in technology and the output wind turbines can now produce. With the recent news release of GE’s new 12 MW Halidade turbine, we are entering a new era in turbine size and expect that this trend will continue. As a result of this change in technology, wind farm operators are able to generate more revenue from the same area of ocean than they were able to previously. The justification of the operators for subsidy free contracts is increasing, given that the size of the turbines and thus the output is continuing to grow at such a rapid pace.

What are the most important lessons you’ve learned during your career?

To avoid burning your bridges! Ultimately renewable energy (particularly insurance) is still quite a small market and you never know when you will have the opportunity to transact, or work, with someone again in the future. It’s important to be patient with those that you deal with, as often they are under similar pressures as you are, and in the end we all want to work in harmony to get a deal done…!

Did you have a mentor and what did they teach you?

I have had a number of mentors over the years, both in and outside of the insurance market. All of them have taught me different things, and I hope that in the future I will be able to mentor someone in the next generation in the same way.