Property Perspective: Keeping Equipment Up and Running
The #1 priority for many businesses is delivering high quality products to their customers on time. And they don’t want anything – including the breakdown of equipment – to stand in their way. AXA XL’s Head of Equipment Breakdown insurance, Brian Strain, and Tom Gallagher, AXA XL’s Equipment Breakdown Engineering Leader, have the same priorities. They want their clients to get their products out the door.
Fortunately, preventative measures, including loss prevention strategies, reliability engineering and insurance, are helping protect facilities’ financial health, keep equipment up and running, and high-quality products out for delivery. Here Brian and Tom explain more.
What is the current state of the Equipment Breakdown insurance market?
Strain: Right now, capacity is shrinking. In addition, there are also very few carriers in the market because there are some very challenging exposures, both in terms of complexity and severity of the associated risks.
Of course, the capacity crunch comes at a time when businesses are more reliant on various types of equipment to conduct business in many ways. As this reliance continues to grow, and processes become more automated than ever before, making sure equipment and technology remains reliable and operational is a big part of the production process for many businesses.
When you say “challenging exposures” what do you mean?
Strain: Generally, we’re talking about very large, highly specialized equipment – things like: large forge presses and steel mini mills, concrete manufacturing equipment, paper mills, to name a few. Power generation systems, industrial freezer units, food manufacturing and critical production equipment as well. When systems like these are damaged or otherwise inoperable the impact on the business can be devastating:
- Business Interruption. Downtime for repairs can result in a company’s inability to deliver on existing contracts or even bid on new orders.
- Property. Repairing or replacing equipment can be very expensive. Some of the equipment is one of a kind and lead time for new equipment or even replacement parts can be extreme.
- Environmental. Industrial refrigeration systems that use anhydrous ammonia as a coolant can result in release of toxic liquid and gas that can contaminate food products.
Gallagher: It’s easy to see how far-reaching and harmful breakdown of complex equipment can be. Compounding the complexity of these risks is frequency. We are seeing more of these happening in recent years. That’s why our attention to reliability engineering is a big advantage to our Equipment Breakdown clients. Failure of even a single, (critical) piece of equipment can result in the shutdown of an operation that may negatively impact a facility’s production goals including their ability to deliver product in the quantity and within the timeline promised to their customers. We were the first equipment breakdown insurer to incorporate critical equipment reliability engineering reports into our product offering.