Understanding Transmission & Distribution Lines Exclusions

In 2008 reinsurers were focusing on China as the powerhouse for substantial premium growth. Malaysian reinsurers too refused to be left out in pursuing this glorious path, so it seems. Before the lunar New Year, a substantial and devastating snowstorm ravaged Hunan, Hubei, Guizhou, Jiangxi, Anhui provinces and Guangxi Zhuang Autonomous Region resulting in more than 770,000 insurance claims filed. That was a whooping USD280million worth of insurance claims. Estimated more than USD120million were reserved for claims settlement to regional electric power industries and telecommunication service providers. A sizeable amount was traceable to business interruption related losses.

The 2008 snow storms however extended over a period of nearly four weeks, and therefore, from the reinsurance perspective, could consist of multiple events.

Much of the USD140million claims reserves were traceable to damages having direct connection to transmission and distribution (T&D) lines. Approximately 330 major power lines and 96 electricity transmission towers collapsed under snow and ice loading.collapsesnowstorm

This caused severe disruption to the railway system resulting in severe delays in re-supplying fuel to electricity generating stations – the result was a much heavier business interruption losses to insurers. There were more than 24,000 mobile telephone services disrupted and many become inoperable. The fixed line telephone service was also badly affected by the collapse of 150,000 telecom poles and accompanying damage to 16,000 km of telephone lines. By 11/02/08 the total economic cost to the telecom operators is estimated to have been at least USD 152.8 million.

In Malaysia, all forms of T&D covers are excluded from the treaty. Any acceptance done is on a case-to-case basis. But in China, reinsurers were willing to forego the T&D exclusion, perhaps blinded by the huge potential business volume. As a result 2008 was a bad year with 2009 a hang-over for all.

Perhaps it is appropriate if we take an educational tour of the Transmission and Distribution Lines Exclusion Clause.

T&D exclusion is outlined in most property treaty contract as:                      All above ground transmission and distribution lines, including wire, cables, poles, pylons, standards, towers, other supporting structures and any equipment of any type which may be attendant to such installations of any description, for the purpose of transmission or distribution of electrical power, telephone or telegraph signals, and all communication signals whether audio or visual.

 This exclusion applies to all equipment other than those on or written 1000 meters from an insured structure.

 This exclusion applies both to physical loss or damage to the equipment and all business interruption, consequential loss and/or other contingent losses related to transmission and distribution lines, other than contingent property damage/business interruption losses (including expenses) arising from loss and/or damage to lines of third parties provided these are not part of a transmitters’ or distributors’ policy.

 For the next series on T&D, we shall look at the following diagram as we make attempt to read and understand what T&D lines exclusion clause is all about and how the wordings can affect how we underwrite business enumerating from power plant producers, telecommunication services providers and electricity supplying sectors.

Transmission and Distribution Lines Exclusion Diagram

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14 comments for “Understanding Transmission & Distribution Lines Exclusions

  1. naveen
    August 22, 2013 at 18:02

    please can you send me a link for the subsequent discussions on reading and understanding the exclusion and its effects.

    • August 24, 2013 at 22:17

      Which particular exclusion you are referring to? Generally T & D exclusion is about the section of the T & D lines that exceed 1km from the main premises or property.

      • Anonymous
        September 1, 2013 at 12:16

        I was looking for the subsequent series of discussions on the T&D exclusion….last para of this page

        “For the next series on T&D, we shall look at the following diagram as we make attempt to read and understand what T&D lines exclusion clause is all about and how the wordings can affect how we underwrite business …..”

        Thanks

        • September 1, 2013 at 13:35

          Sorry, I just could not find the time to pen down further thoughts…. but yes there were further development with Malaysia and much had developed since. Let me know what exactly you like to know since I may not be writing anything very soon about t&d lines….

  2. Caryn Lee
    February 13, 2013 at 14:52

    Do you think the following wordings better for the Malaysian insurance industry?

    Transmission and distribution lines exclusion

    All above ground transmission and distribution lines, including wire, cables, poles, pylons, standards, towers, other supporting structures and any equipment of any type which may be attendant to such installations, for the purpose of transmission or distribution of electrical power, telephone or telegraph signals, and all communication signals whether audio or visual.

    This exclusion applies to all equipment other than those on or within 1,000 metres from an insured structure and or premises.

    This exclusion applies both to physical loss or damage to the above mentioned equipment and all business interruption, consequential loss and/or other contingent losses related to transmission and distribution lines.

    However it is agreed that public utilities extension involving any transmission and distribution lines feeding to the Insured’s structure and or premises is not subject to this exclusion.

    • February 14, 2013 at 18:46

      Think so especially with the following wordings: “However it is agreed that public utilities extension involving any transmission and distribution lines feeding to the Insured’s structure and or premises is not subject to this exclusion.”

  3. Foo Chin Ming
    August 15, 2012 at 15:45

    The Malaysian fire insurance policy covering property involved in manufacturing has a mandatory Electrical Installations Clause A attached to the policy which in effect removes the Lightning cover from the policy. I would like to know if we can avoid the T & C of this warranty in respect of lightning damage to property not related to the manufacturing aspect of the risk ie computers, office equipment, telephone system ?

    • August 19, 2012 at 21:28

      Hi,
      EIC A is a Fire tariff warranty for industrial equipments, plants and machinery (EP&M) and would need to be extended if coverage for arching of electricity etc. is required. While the tariff states this is a standard warranty (to exclude) for such industrial EP&M, however it does requires similar application in respect of office equipments like telephone and computer systems…. I am not sure if I have provided you the appropriate answer to your questions…. let me know.

  4. LKK
    May 2, 2011 at 19:42

    Need to know what is contingency property damages and contingency business interruption losses, the terms used in the T&D exclusion clause.

    • May 10, 2011 at 23:10

      contingency business interruption losses are those that relate to suppliers extension, customer extension in the usual business interruption insurance policy. contingency property damages (seldom or almost never come across…) may be those that relate to losses that are not exactly property damages but losses as result of unable to use anymore, i.e. molten iron which is unuseable as result of electricity supply stopped suddently…

  5. Anonymous
    April 14, 2011 at 00:26

    do U have swiss re and Munich re wordings for transmission and dist lines exclusion clause?

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