Del Duvall

    Del Duvall runs AIU Energy group's worldwide effort to provide energy operations and investors with property coverage.

    For those not familiar with the insurance giant, American International Group, Inc. (AIG) has emerged as a leading US-based international insurance organization and among the largest U.S. underwriters of commercial and individual insurance. With its corporate roots based in Asia, its member companies write property, casualty, marine, life and financial services insurance in approximately 130 countries.

    Until 1993 various AIG member companies serviced the power generation sector somewhat independently. "At the time we had a number of units within AIG servicing the domestic market, each with varying degrees of success. With the energy industry having developed to a more international business with more sophisticated insurance needs, we felt consolidating into one industry specific unit--AIU Energy--would be the best way to address the entire market," states Duvall. "To date it is still growing!"

    Duvall has the confidence of AIG's top echelon to accomplish the task. With a long career in underwriting for utilities, Duvall has applied that experience to energy business as a whole. In that role, he faced the fundamental questions that many service companies confront in this global age: how does one of the world's preeminent service firms follow operating companies into a worldwide market? Its clients-oil and gas producers and refiners, oil and gas exploration and development companies, engineering companies and non-governmental financial institutions, have all gone forth into a risky world.

    He rightly believes the "De-regulation in the U.S. will produce major changes and the players will re-focus their attention on new problems and issues. It will significantly effect the insurance underwriters and their view of the business. Public utilities can pass risk back to the rate base. Under deregulation and competition they will not be able to do that. And therefore the insurers view of the underlying risks must also change."

    Duvall also notes that AIU has unbundled its engineering services. "Many insurers want to send their engineers to the plant once a month. Rather than as a benefit though, many utilities view the presence of the insurer's engineers as a subtle form of commercial harassment as the utility engineers feel they know more than the insurance engineers. With AIU, if the utility wants, we will limit our engineering visits to get only enough information to meet our underwriting needs."

    AIG expanded its business from the Far East to Latin America. In today's terms Duvall sees "Latin America as one of the top growth areas in the world today - equivalent in many respects to China and Southeast Asia. We are really focusing on Brazil, Argentina and Chile."

    The availability of natural gas in South America and the continuing emphasis on privatization will drive these changes. As he says "The new gas pipelines now under construction in the Mercosur region will provide huge new opportunities for utilities. And the availability of private capital will make it all possible." From his own business perspective, he quickly adds, "Underwriters will have to maintain and even increase their flexibility and invent new approaches in order to meet successfully worldwide coverage demand.

    Duvall describes the AIU power generation customer as "having large to medium sized plants. Clients are from across the board. Some clients are just getting off the ground. Some have been in the business for nearly 100 years." He adds, "The majority of our customers come to AIU and say 'We are thinking of purchasing a position in a privatized company in XYZ country.' As a result, the investor has us involved from the very beginning." AIU offers a continuous policy that insures construction, testing and start-up. It is important to note that coverage is continuous but the underlying contracts change so as to achieve the proper exposure.

    There are areas for new products. Changes in customer needs have altered the traditional property and casualty insurance markets. In many circumstances these changes have added risks for which the client will need help in developing either funding or finite risk alternatives. The insurer will have to step out of the usual underwriting box and address some of these non-insurance industry issues. Or he will lose out to the banking industry.