Post on 31-Mar-2015
transcript
www.marsh.com
Risk Management & Terrorism Events An Insurance Approach
26 January, 2010
Ian Roy
2Marsh
Terrorism and the Energy Market
Events in the Energy market are relatively rare– Saudi Aramco Truck Bomb 1996
Target was military USD 2 bbl price hike
– 2007 PEMEX pipe-line bombings, Mexico Small PD damage, large seepage and pollution claim.
– 2008 to 2010, 6 bombs by environmentalist in British Columbia, Canada
– Bombs defused Mozdok-Tiblisi pipe-line
Underwriters generally operating with 0 % loss ratios
Historically little technical engineering involvement.
Energy Risks perceived as low?– Good protection due to strategic nature of assets
3Marsh
Estimated Maximum Loss (EML)Why is it important to estimate the size of potential losses in advance ?
Insurer’s perspective:– provides a quantitative measure
of the risks they are underwriting– sets the level of capacity that can
be committed to the risk– provides quantitative
understanding of accumulation (e.g. location) issues
– internal governance
Client’s perspective:– supports informed decision
making regarding the design of the insurance programme loss limits vs. EML effective use of market
capacity– provides supportable basis for
purchase of limits of insurance (internal governance)
– a potential means of saving premium (loss limits)
4Marsh
Terrorism Estimated Maximum Loss (EML)
Methods available for generation of Estimated Maximum Loss (EML) values related to Terrorism risks– method developed to meet the requirements of project owners and
project lenders – also applied to oil, gas, petrochemical and other types of “non
energy” related manufacturing facilities
Supports informed decision making about purchased limits of Terrorism insurance
Draws upon specialist resources– engineering/consequence modelling– client HSE, operations personnel– security specialists
5Marsh
Risk Measurement: Estimated Maximum Loss (EML)How big are potential losses?
Risk Measurement
Likelihood of Losses Occurring
Consequences of Losses
Assessment of Quality of Risk Control Features
Assessment of Quality of Risk Control Features
Assessment of Quality of Risk Control Features
Assessment of Quality of Risk Control Features
Assessment of Quality of Risk Control Features
Assessment of Quality of Risk Control Features
Analytical risk-management approach using Consequence Tools
6Marsh
Marsh EML Methodology – what it is and what it is not
What it is– Property loss estimate– Business Interruption loss estimate– 3 bomb type scenarios placed at specific site locations.– Could consider deliberate/targeted release of inventory
What it is not– It is not a prediction of the terrorism attack (reasons, target or
likelihood)– It does not identify the most likely scenarios – Does not consider rocket/airplane type attack– Does not specifically consider explosions at offices/buildings– Does not consider knock-on effects
7Marsh
Marsh EML Methodology – Three generic scenarios
1. Truck containing some 4 t of a TNT type explosive igniting at one of the entrance gates.
2. Car containing some 1 t of a TNT type explosive driven on site and igniting near the highest value assets.
3. Human/Backpack bomb containing some 25 kg of a TNT type explosive taken on site by a human being and igniting near the highest value assets.
8Marsh
Marsh EML Methodology – EML and the report
EML: what we need– Property replacement values– Site Lay out, congestion and confinement levels– Gate location (HW) and security checks (SW)– External lay out (public / private roads, access to the areas)
EML: Tools we use– SLAM– TNT vs. Ethylene Oxide equivalency file
Report: what we also need– Security hardware (gate, fences, etc.)– Security practices on site (controls, explosive detectors, etc.)– Security measures off site– Terrorism simulation / drills practices
9Marsh
Risk Measurement What is SLAM?
Risk assessment tool for clients to facilitate ..
– Property Damage loss limits– Business Interruption exposures– Liability studies
Easy to use design tool to support ...– plant layout– buildings location and design
Tool to facilitate insurance placement by providing the Underwriter with a realistic Estimated Maximum Loss based on credible events applied consistently across the energy risk spectrum
Developed with Shell and Imperial College London
10Marsh
Risk Measurement: ConsequencesWhy was SLAM developed?
EML evaluation aspect
Modelling approach
Plant type
Plant layout
Source terms
Explosion epicentres
Pressure-distance profile
Damage assessment
Loss History
SLAM versus TNT models
Fundamental, deflagration-based, tuned to Loss History
Sensitive to inherent risk type
Penalises poorly laid out or highly congested plant
Volume-based structures … requires less mass for an equivalent explosion
Centred on process structures
Matches observed "far-field" effects
Differentiates between buildings, tankage and process plant
Models small/large release events … models major losses
11Marsh
Fire & Blast Damage Allocation
Overpressure(bar)
Process Plant Tankage Buildings Machinery
>0.7
0.70 – 0.35
0.35 – 0.20
0.20 – 0.10
0.10 – 0.5
100
80
20
5
-
100
100
100
50
-
100
100
100
100
50
80
40
-
-
-
12Marsh
Example – Truck Bomb parked on public roadAdjacent to Strategic high value asset – EML USD 380 million
11
16
10
13
12
20 16 19
18
16
16
16
16
16
15
15
15
15
15 15
15
11 11
11
11
3
4
9
6
6
17145
7
157
6
17
10 10
10 10
10 10
10 10
10
10
14 13
8
8
9
54
1
2
5
3
2
1
0 500m
0.70 bar
0.35 bar
0.20 bar
0.10 bar
0.05 bar
13Marsh
Example – Car Bomb driven into assetsAssumed that in heart of the strategic asset – EML USD 290 million
11
16
10
13
12
20 16 19
18
16
16
16
16
16
15
15
15
15
15 15
15
11 11
11
11
3
4
9
6
6
17145
7
157
6
17
10 10
10 10
10 10
10 10
10
10
14 13
8
8
9
54
1
2
5
3
2
1
0 500m
0.70 bar
0.35 bar
0.20 bar
0.10 bar
0.05 bar
14Marsh
Example – Bag Bomb Carried on-siteAssumed that in heart of the strategic asset – EML USD 130 million
11
16
10
13
12
20 16 19
18
16
16
16
16
16
15
15
15
15
15 15
15
11 11
11
11
3
4
9
6
6
17145
7
157
6
17
10 10
10 10
10 10
10 10
10
10
14 13
8
8
9
54
1
2
5
3
2
1
0 500m
0.70 bar
0.35 bar
0.20 bar
0.10 bar
0.05 bar
15Marsh
Re-build times and Business Interruption
Overpressure(bar)
Process PlantHeavy
Machinery
BuildingsCoolingTowers
Tankage Average Site
Guide Interruption Months
>0.70 bar
0.35 bar
0.20 bar
0.10 bar
0.05 bar
18 to 36
18 to 24
6 to 9
3 to 6
0
12 to 15
9 to 12
0
0
0
6 to 9
6 to 9
6 to 9
6 to 9
3 to 6
9 to 12
9 to 12
9 to 12
6 to 9
0
18 to 24
18 to 24
6 to 9
3 to 6
0
The following outlines likely interruption periods following damage on a typical process plant
16Marsh
Terrorism Estimated Maximum Loss (EML): Property Damage
1 Threat & Vulnerability analysis – potential threats identified with assistance of security consultants
(location specific)– modes of likely attack identified with security consultants
2 Project risk profile generated – probability and direct consequences of attack evaluated
e.g. high explosive blast effects, vapour cloud explosion– EML calculated
3 Risk mitigation – review security procedures and security infrastructure– elemental system re-design (apply control systems) to mitigate
risks and reduce calculated EML
A three step approach:
17Marsh
Terrorism Estimated Maximum Loss (EML)Without effective vehicular access controls
Threat Scenario:1. Large Truck Bomb (4 tes TNT)
detonated at EPF access gate
2. Car Bomb (1 tes TNT) detonated inside main process area
3. Bag Bomb (25 Kg TNT) hand-carried in to process area and detonated
4. Explosion following deliberate release of LPG from storage bullets located on main site
Without Effective Controls
(Limited Threat Mitigation)
USD 142 mm
18Marsh
Terrorism Estimated Maximum Loss (EML)With effective vehicular access controls in place
Threat Scenario:
1. Large Truck Bomb (4 tes TNT) detonated at access gate
2. Car Bomb (1 tes TNT) detonated inside main process area
3. Bag Bomb (25 Kg TNT) hand-carried in to process area and detonated
4. Explosion following deliberate release of LPG from storage bullets located on main site
Current Controls:
• Earth berm around site
• 24/7 armed access control/search points
• Hardened search & hold areas
• Blast walls at access points
• Restricted/dedicated “onsite only” vehicles kept
inside perimeter
Current Controls:
• Sniffer dogs
• Personnel ID and vehicle access control systems
• Vetting & background checks of local staff
• Permit system for zoned work areas on site
USD 22 mm
19Marsh
Risk Management and Terrorism Events
Marsh have developed procedures and methodologies for EML evaluation
Combined with a view of:– Likely modes of attack– Adequacy of safeguards
A Risk Profile can be generated
Mitigation plans can be applied or reviewed
Elemental system re-design can be conducted
www.marsh.com