Oil & Gas - BI/CBI & the Importance of Risk Engineering

Transcription

1 Allianz Global Corporate & Specialty Oil & Gas - BI/CBI & the Importance of Risk Engineering Alasdair Walker Head of Energy & Marine, Africa Region OSEAI Conference Mauritius, August 2015 Image: Shutterstock

2 Contents Introduction What s the Issue? Understanding Mitigation Conclusion Q&A 1

3 2 What s the issue? Image: Shutterstock 2

4 Allianz Risk Barometer 2015 Supply Chain And Accumulation Risk Trends Trend Globalization Specialization Example 1 4 Outsourcing, offshoring Geographical concentration of production Risk Impact Local concentrated risks become globally diffused, involving multiple actors Efficient process can be easily disrupted by localized event Complexity Lean processes Automatization Product/network complexity ICT 3 6 Single sourcing, buffer stock reduction Reliance on multiple parts/players in diverse locations reduces visibility and adds latency into monitoring systems While initially efficiency is improved and costs are lowered, fewer alternatives in case of disruption Disruption can escalate to an industry-wide or nation-wide crisis Source: New Models for Addressing Supply Chain and Transport Risk, World Economic Forum

5 Africa Refinery Landscape Existing and planned 21/30 SSA Refineries < 50,000 bbl/d Planned refineries 1.2mn bbl/d capacity Existing Refineries Planned Refinery capacity 4

6 Allianz Risk Barometer 2015 Top Business Risks Around The World #1 Business interruption and supply chain risk ranked number 1 for a third year in a row (46%) Cyber risk biggest mover in the top 10 risks 5

7 Increasing Global Interdependencies Exposures not unique to Oil & Gas 6

8 Optional Subject line for Navigation Underwriting Assessment Oman Industrial Zone Container Terminals Steel Terminal Jetty Area Urea Plant Tank Refinery Methanol Plant Petrochemical Plant Power Plant & Desalination Plant This is what you may see This is what we as insurers see 7

9 Insurer s Perspective Total Downstream Energy claims 2013 & 2014 USD 3.1bn Claims in excess of USD 50mn Proportion made up of Business Interruption losses BI/CBI 73% Source: Willis Energy Database 8 BP Texas City Refinery

10 3 BI/CBI Understanding Image: Shutterstock 9

11 Definition How we understand it Standard Business Interruption Contingent Business Interruption Covers the loss of income a business suffers following a covered physical damage loss at the facility Covers the loss of income of an insured when a Named / Unnamed Supplier or Customer suffers a physical loss resulting in disruption of the Insured s own business. Common understanding among all stakeholders? 10

12 What does it mean to whom? Differing stakeholder s perspectives Insured Underwriter Broker Risk Engineer Loss Adjuster Forensic Accountant 11

13 Are our client s appropriately covered? 45% 40% Percentage of insured s estimated to be underinsured for their business interruption risks Percentage of true economic loss recoverable through insurance** Image: Shutterstock Source: *MDD Forensic Accountants, Reporter June 2015 Source: **Estimated AGCS Global Claims 12

14 4 Mitigation 13

15 Underwriting Assessment Evaluating our underwriting approach to BI/CBI exposures Assessment Challenge underwriting methodology Establish a BI/CBI task force Identify trends & validate processes Findings Need to apply global consistency and knowledge sharing Revise Risk Grading assessment w/ BI focus Adequacy of T&Cs for identified high risk exposures Takeaways Dedicated BI information access and understanding Risk Engineering focus critical Partnership with client and local experts 14

16 Risk Engineering Action Points 1 BI Heat map created to monitor AGCS exposure to Energy BI losses # of Accounts % of Total Red accounts (highest risk; C4, D3, D4) % Orange accounts % Yellow accounts % Green accounts (lowest risk: A1, A2, B1) % 2 3 Integrate BI/CBI review results into underwriting strategy Introduce forensic accountant evaluation into UW process Information access enabling greater risk understanding 15

17 Partnership Risk transfer vs. Knowledge transfer? Image: Vintage Books 16

18 Claims Varying dynamics PD Prompt notification & investigation Claims settlement often before/soon after repairs BI BI loss can be slower to materialise Complexity of BI measurement can make agreement a slow process CBI Can be more protracted Notification can be delayed Obtaining loss info from supplier not always straightforward Allianz

19 5 Conclusion Image: Shutterstock 18

20 any Questions? 19

21 Contact Alasdair Walker Direct: +27 (0) Mobile: +27 (0)