ALLIANZ RISK GRADING (Oil/Petrochemical/Chemical)

Transcription

1 CATEGORIZATION OF RISK ICHEME SYMPOSIUM SERIES NO. 144 GOOD, BAD OR INDIFFERENT, SITE RISK GRADING Paul Clarke Aliianz Cornhill International Division, 32 Cornhill, London EC3V 3LJ How does your site stack up against others? Are you more hazardous, or more or less likely to have a loss? If so, can you minimise the impact of the incident? Finally, where can you best spend your Capital to protect the site or the Group? Insurance Engineers regularly have to evaluate the quality of sites of the clients we do (and don't) insure. Most use some assessment methods to provide quality analysis. For Aliianz Cornhill, we are able to do this by use of a Risk Grading System, which differentiates between General/Manufacturing industries, and Chemical/Petrochemical Risks. Because a client will often insure both Property, and Business Interruption, this is also one area we analyse. This paper focuses on what goes into a Risk Grading system like ours for Oil and Petrochemical/Chemical business, and how we feed back the information. The comparative nature of the system means that similar facilities can also be looked at. This can also compare the relative premium that a good performing site should pay as against a poor performer. Analysis Models E S ALLIANZ RISK GRADING (Oil/Petrochemical/Chemical) VU btpmmmt»utmt mm mm* 515

2 ICHHME SYMPOSIUM SOJES NO. '-- GOOD, BAD, OR INDIFFERENT? Do you feel your site comes into any or all of these categories?. However, on what basis do you make your assessment, and do others use that as well?. How do you compare yourselves to other Group locations, and how do you rate?. The facilities in which you work, will be subject to a series of inspections over the years. These can take the form of internal and external audits, self assessments and can include studies carried out by consultants on your behalf. As your Insurers, we also want to survey the premises, to then advise the Underwriters on the quality of the risk. To carry out Risk Assessments, we ask for data, talk to site personnel and walk through the site. The aim of this paper is to give an insight on how we as Insurers assess the site from a property-damage and business interruption standpoint. Other Insurers and brokers have their own methods, but this is based on the Allianz Risk Grading methodology. Grading of Risk The standard of any grading system is that it allows for comparisons between plants of the same or similar occupancies. This is to highlight the strength of the protection, "the defence in depth", or weaknesses that need to be addressed. At the same time, it can be recognised here that some processes have a greater inherent hazard, should control and safety systems fail to allow safe shutdown. Once we know the occupancy, we can start to look at the expected protections and layout. At the same time, the age of the site, and its development over the years can have an important impact on the quality of the risk as fire divisions are knocked down, or breached, a spare capacity is utilised, and as obsolescence of equipment creeps in. The Risk Management Process MIIH'.'-'IM) 516

3 ICHEME SYMPOSIUM SERIES NO. 144 Consistent questions As a Group, the occupancies may vary considerably, potentially involving refineries and petrochemical works, or chemical works with mixtures of hazardous and non-hazardous. Our assessment method covers a full range of the site operations, under the general headings of Property Damage and Business Interruption :.- Occupancy- Inherent Hazard Factor Process Modifying Hazards/ Safety Features Spacing/Layout Construction Utilities Management Fire Protection Security Additional Perils Business Interruption Loss History Risk Information Risk Analysis Process Flow IH.':ffj -'l The important thing is to ask questions consistently, and therefore assess from a level playing field. The reason for this can be plainly seen if you compare a facility in an earthquake zone, compared with one outside such an area. Once this information has been obtained, it is plugged into the Grading model, and produces a grading for the site based on the site as seen at the time of the survey. This is the "As is" position. At the same time, sites are often constantly changing, and as insurers, we also make recommendations to improve the risk areas( which are themselves changes). On the basis of how these proposed changes could affect the way we view the facility, we then come up with a "To be " scenario. It is the difference between the "As Is " and "To be " gradings, that show how much improvement can be made at any one site.

4 1CHEME SYMPOSIUM SERIES NO.!4^ Such differences are normally positive, as you would expect a site to improve over the years. In this way, the "To be " position would be better than the "As is". In fact, this system can also reflect negative changes, which are caused by the changes in operations, site layout, or some other deterioration. An example of this could be the location of a new unit in amongst other process equipment might reduce previous good spacing, and potentially expose an existing control room. Risk Modelling - As Is vs. To Be Situation BBBBI! - Integration of risk grading results with recommendations - Eacfi recommendation is assigned to a risk grading factor - Methodology and software allows for modelling - Priorities can be assigned at corporate level - Additional priority model allows for priority at unit level What does the Client gain? An Insurance survey, whether it is carried out by the Insurer or a Broker, is for information gathering, so that an assessment of the quality of the site risks can be carried out. Once complete, you get feedback, often in the form of Recommendations, but these relate just to one site. As part of a group of companies, your Risk or Insurance Manager (or Finance Director) will be insuring a range of locations, and your site(s) will be a part of this programme of surveys. The premium paid is a pot of money, allocated centrally or on a site by site basis. Insurance is, in the end, about taking risk, and protecting against it. By having a grading system applied to the sites in the programme, the better quality sites can actually benefit, by paying a lower proportion of the overall pot. As the average quality of the sites in the programme improves, this also helps your insurance buyer (The Risk Manager) get as good a deal as possible from the Insurance Underwriters. Integrated Approach fi"""it', l MBnagerr^r.i Infb Corporate Sianaiy" tt.jfc Into I 518

5 . : Z".L: J M M / M S 8 «I - Where to spend your effort/money Where safety issues need to be addressed at a site, there is an in-built priority associated with them. With Risk Improvement Proposals, these also go into the loss of Property and the interruption of Business, which might follow a major incident. There is no question that the safety of lives is paramount, but it is very worthwhile for you to have a job to come back to. However, where is the best place to put your effort, or spend money?. When improvements are proposed, the relative importance, the impact of it being accomplished, and the benefit to the overall programme of assessment can also be evaluated. Aliianz Risk Grading - Benefits Provides company/intercompany quality profile Simplification of paperwork Allows for "AS 1SVTO BE" studies Graph presentation of risk improvement or deterioration over a number of years/trend analysis Unlimited risk modelling capabilities Tool for decision making Pnoritising budgeting process for risk improvement Premium allocation per subsidiary/location fi Ul i ;llt VI In what order of priority should we> fireproof the reactor supports in Scunthorpe? repair the cracked/spalling fireproofmg at Milford Haven, Scunthorpe & Hamburg put subsurface foam injection in the Storage tanks at Milford Haven? upgrade the control room and/or sprinkler protect the warehouse at East Kilbride? reprint and review the hot work procedures and permit system? (and are the US and Spanish sites using the same concept) develop a Group-wide Business Recovery plan? Which will help the Group as a whole, and which is very site specific? If the E. Kilbride control room is for a bottlenecking plant that affects the whole Business unit, and the warehouse is the sole distribution centre for the UK, some answers are less easy than others. This method is to be used as an aid to decision making, for a client Risk Manager and the Management of Industrial sites. When used across the range of sites belonging to the company, it can strengthen the decision process, and is capable of being used as a client model, as well as a tool for insurers' purposes only. 519

6 ICHEME SYMPOSIUM SERIES NO. 44 Risk Grading -12 Risk Factors BBSBB. tnnilimii' IMMpMcytaharvmH*Mrfl ' " "«"» TortJ Numbtr of Points /Risk Gmtlng Factor HOW DO WE WORK WITH THE INFORMATION? This involves the conversion of the information into a numerical format. But first we break down the site,it's occupancy, and the elements of exposure and protections into bite-size chunks. From there we can more easily work with the data. There are a series of headings under which we assess the available facts. Occupancy-Inherent Hazard This relates to the overall occupancy of the facility, and therefore by extension the potential risk, It looks at whether the site is a complex oil refinery, a primary pharmaceuticals manufacturer, or a chemical plant. Different levels of severity of operating conditions provide different relative hazards, and can be recognized as such. Process Modifying Hazards/Safety Features Even within a "standard" facility, there are features which make the potential likelihood of an incident more or less. Construction of a new unit, or the mothballing of an old unit can possibly change the risks. Process Safety Features include relief systems, flares, MOVs, and how they apply to the processes being carried out. At the same time, for older units, and equipment, the designs and safety features themselves have changed over the years. In this case, the systems must be reviewed against latest thinking, compared with what was appropriate at the time of construction. 520

7 ECHEME SYMPOSIUM SERIES NO. 144 LAYOUT In the end, any facility must fit into the plot space provided for it. Having said that, the plot space should be consistent with what is being asked to be fitted into it. Where the site has become "fully developed" there is often little room for manoeuvre and certainly no room for error. Where possible, separation between different occupancies should be by physical distance. Where this can't be achieved, fire break walls with protected access ways are important. CONSTRUCTION Once we have sorted out the layout, then the construction elements come into play. For the enclosed areas, we will be looking at the company design guidelines addressing standard building code issues such as wind, resistance and snow loading, then naturally, the ability of the building construction to not only not support a fire, but even resist it. We will be looking for fire proofing of open or enclosed structures acting as supports to reactor vessels in flammable liquid/gas service, and in principle, fire separation between the manufacturing/ operating area and the warehouse, or between the office area and the warehouse area/manufacturing area, with appropriate subdivisions for other areas. As control systems become more and more automated, any control room should be adequately separated from the process area, including protection and detection systems, as necessary. Drainage systems should allow for adequate removal of both rain water, and if this is a worse case, fire water. The drainage system should be to an appropriate impounding basin to allow fire water run-off not to pollute water courses or rivers. UTILITIES Power, steam, gas etc. How resilient is the design, and how loaded up is it? MANAGEMENT This section looks at the areas of Risk Management, Operations, Maintenance, Inspection, etc. FIRE PROTECTION From sprinklers and deluge systems, through fire and gas detection, to water supplies, and the fire teams to use them (and the planning that goes into it) SECURITY Active and passive protection to make the site secure.

8 MP. ' " "-WJ-1 <\ir\-=.s >.r 144 ADDITIONAL PERILS These cover other possible causes that could bring about a loss at a site, and include:- Natural Social Third Party Storm Subsidence etc. Vandalism Riot etc. Collision Adjacent facilities etc. Consequential Aspects Contamination Debris removal etc. How much does a loss hurt, and for how long? BUSINESS INTERRUPTION How much have you, can you ( or can others) do on your behalf, to mitigate the circumstances of a loss. LOSS HISTORY What has the loss history been like in the past?. We use a five year period as a selected time frame for this model. We look at the issues of repeated losses, or one big loss at a particular site. RISK INFORMATION Where does the information come from, how much does it answer the questions, and how old/ potentially out of date is the data? 522

9 Kiiz: \i : ' - -RI2S NO. USING THE RESULTS When the data has been put in, the results come out for individual sites. The detailed issues of areas of strength, and opportunities for improvement within each site are then available. Summaries of the data can then be presented for overview and trending purposes. This can be based over:- -Years Risk Grading As Is/To Be '97/"98 -Group locations 523

10 ICHEME SYMPOSIUM SERIES NO. 144 Risk Grading average - Region r -Loss estimates Loss Potentlal(PML) vs Quality Level ^IIIM.Ui'41 -Specific types of recommendation, or area for improvement Risk Grading - Human Element Factor As Is T h J A U,

11 ICBEME SYMPOSIUM SERIES NO. 144 Because the analysis looks at both the Business Interruption as well as the Property Damage aspects, we can present the results in a number of different ways. Use of Risk Grading Results Management tool for Insurer & Client's Risk Manager, because of.. Company profile. Indication of quality variations within a company. indication of seventy variations within a company. Comparison between PD and Bl quality. RisK improvement proposal analysis J Once the trends are able to be analysed, then this can be integrated into the decision- making process for Companies/Corporations, to best advise them on where to spend their effort/ capital investment. Not only that we have also developed client application modules which can provide more option-analysis for a client's Group Risk Management, for their own benefit. If you have a way of comparing individual sites within a Group in a consistent way, then the comparison itself can be used to help allocate premium to those individual sites, as a proportion of the overall programme premium. Higher quality graded sites would then pay a lower proportion of the overall premium. Obviously, as the years pass, an overall improvement in the quality of the sites gives the Group Risk Manager the best ammunition to get the best price for the insurance of the programme. Risk Grading - Client Application 525

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