Rapid Earth Fault Current Limiters: Is this “game changing” tech for bushfire liability?
Rapid Earth Fault Current Limiters: Is this “game changing” tech for bushfire liability? | Insurance Business Australia
Environmental
Rapid Earth Fault Current Limiters: Is this “game changing” tech for bushfire liability?
“It significantly reduces the exposure,” says Lockton expert
Environmental
By
Daniel Wood
As winter ends and Australia warms up bushfire risks become more of a priority for insurers, brokers and their customers. Lockton Australia’s Cameron Sheild (pictured above) told Insurance Business that Rapid Earth Fault Current Limiters (REFCL) are a game-changer for this sector.
Melbourne-based Sheild is the global brokerage’s strategic risk advisor for Power and Energy. His focus is third party exposures to bushfires, for example, firms who own or maintain electricity power lines.
“It’s game changing because it significantly reduces the exposure of bushfire liability, pure and simple!” said Sheild. “Rapid Earth Fault Current Limiters or REFCL operates on phase to ground faults whereby the government forecasts a 37% reduction in incidents.”
A large safety switch
According to AusNet, the energy company that owns and operates Victoria’s electricity transmission network, REFCL “is like a large safety switch in the electricity network.” The technology has been used in Victoria since 2017.
“When there’s a fault on a powerline such as if it touches the ground or a tree falls on it, the REFCL detects this and quickly limits the flow of energy through the powerline,” says the firm’s website.
“This way, power can still be supplied to nearby homes and businesses while reducing the chances of fires or electric shocks.”
Sheild said the technology brings an overall reduction in fire ignition by as much as 60%.
“The downstream impact is an enhancement to your risk profile and the attraction of more capacity and transferring of more risk at a viable and sensible price,” he said.
Victoria’s investment in REFCL
Following Victoria’s 2009 Black Saturday bushfires, investigations showed that 159 of the 173 people killed, died in fires started by power lines.
A Royal Commission that followed the disaster recommended insulating power lines or putting them underground. According to an ABC News report, the Powerline Bushfire Safety Taskforce investigated these options, leading to Victorian electricity networks becoming the first in the world to apply REFCL technology to bushfire prevention.
However, the ABC said “at least one other network in New South Wales” rejected the technology.
What about vegetation management contractors?
Currently, Australia’s bushfire insurance market for third party exposures is a hard market. Sheild described some of the rates as “unrealistic” and “eye-watering” due to some parts of the insurance market unfairly lumping the country’s bushfires in with other global wildfire events.
Cameron McKerchar, managing director of Tudor Insurance, told Insurance Business TV that coverage for tree workers is getting very expensive and hard to place.
“For smaller operators, we have an affordability issue with insurance because the pricing for this starts at over $200,000, which is not affordable,” said Melbourne-based McKerchar, whose brokerage is a sponsor of Arboriculture Australia and provides insurance for some of its members.
Sheild said there are alternative risk transfer mechanisms vegetation management contractors, like tree workers, could try.
“Absolutely, straight away an ART solution by way of a captive comes to mind, but that can be cost prohibitive in start-up,” he said. “Can bonds offer a solution? Perhaps long-term solutions aggregating limits over a period of time and allowing a cap for markets to make the risk more attractive and palatable.”
Sheild said “in a knee jerk market that leans more towards the shrinking of traditional insurance capital” more innovative thinking is required. However, he advised businesses facing unaffordable bushfire insurance to consult a specialist broker in this space.
Bushfire liability transfer: no silver bullet
“There is not a silver bullet when it comes to bushfire liability risk transfer,” he said.
In this hard market context, Sheild said it’s important for companies to understand the limit they are buying, model their exposure and embrace new technology to reduce their risk profile.
“It requires an agreed strategy between your broker and yourself and disciplined execution that is tough and ongoing but if undertaken properly can be hugely rewarding in a challenging market,” he said.
Spring brings “increased” bushfire risks
Towards the end of August, the National Council for Fire and Emergency Services (AFAC) released its Seasonal Bushfire Outlook for spring 2023. The report said “large areas” across Australia are at “increased risk of bushfire.”
“The climate influences driving increased risk of bushfire this season are widespread,” said Rob Webb, AFAC’s CEO. “Almost the entire country can expect drier and warmer conditions than normal this spring, so it is important for Australians be alert to local risks of bushfire over the coming months, regardless of their location.”
Are you a broker in the bushfire market? What’s your biggest challenge? Please tell us below
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