12-0268 nat cat pack full v5
TRANSCRIPT
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The NAT CAT PACk
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CoNTeNTsThe NAT CAT PACk: our guide To besT PrACTiCe iN relATioN To NATurAl CATAsTroPhe risk mANAgemeNT ANd TrANsfer
- NATurAl CATAsTroPhe risk mANAgemeNT
- NAT CAT risk mAP
- NATurAl hAzArds ANd CATAsTroPhe modelliNg
- suPPly ChAiN risk mANAgemeNT
- AfTer The eArThquAke: suPPly ChAiN resilieNCy
- busiNess CoNTiNuiTy mANAgemeNT
- busiNess iNTerruPTioN iNsurANCe reviews
- mArsh disAsTer reCovery PorTAl
- guy CArPeNTer CAT CeNTrAl
- bowriNg mArsh: globAl ProPerTy
- lessoNs leArNed from The CATAsTroPhes of 2011
- iNsurANCe ClAims PrePArATioN
- susTAiNAbiliTy The ChANgiNg ClimATe of risk
- ProPerTy susTAiNAbiliTy greeN buildiNgs
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Background
With natural catastrophe (naT caT) events increasing in
frequency and severity, and insurers scrutinising
exposures more than ever, the necessity for proactive
risk management and swift post-loss support is clear.
The increasing complexity of risks, combined with the
desire for greater transparency from markets and
supervisory authorities, is placing ever greater demands
upon organisations to provide easy access to accurate
property exposure information.
up-to-date and detailed naT caT information is of
paramount importance, allowing for an informed
decision-making process in relation to loss prevention
and resilience, loss mitigation, and risk transfer for direct
naT caT risks, but also for indirect risks such as
exposures of key customers or suppliers.
regular checks, for example, on the risk of natural
hazards and the adequacy of naT caT limits, are
essential for efficient and adequate resource allocation,
and risk financing decisions.
naT caT Pack
The naT caT Pack is our guide to best practice in risk
management and transfer of natural catastrophe
exposures. The naT caT Pack includes the following:
NAT CAT Risk Map This is an interactive map of your complete portfolio of assets, including suppliers locations
where appropriate. From a single view you can see all your
property risk data, and now this includes naT caT hazard
exposures. In collaboration with cS Stars and using
naTHan (Munich re geoSpatial Solutions natural
hazards risks database), we can offer naT caT exposure
information using a unique licensing agreement.
The naT caT risk Map includes natural hazard data for
all your locations, and suppliers on request, through the
risk goggles view in Stars Enterprise. This can include a
portfolio exposure assessment report and workshop, as
described below. This initial step is essential for full
portfolio view, helping to identify hot spots requiring
further consideration.
NAT CAT exposure assessment a Portfolio Exposure assessment (PEa)* assesses the exposures of your
portfolio and accumulation of risks. The assessment
consists of the reporting of your portfolio on naT caT
exposures and accumulation analyses in relation to the
cresta Zones in which your sites are located using
naTHan. The portfolio assessment allows for analyses of
natural hazards at up to 5,000 locations worldwide with
the position of each individual risk identified at the
Natural catastrophe risk maNagemeNt
* a PEa provides the zoning information and maximum limits to highlight locations that require further review; the next step is more detailed modelling that looks at the likelihood of events and specific loss estimates for identified hot spots, which provides a more accurate picture.
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2 Natural Catastrophe Risk Management
maximum level of detail. This can include your own
locations and that of suppliers, and can be extended to a
full vulnerability and loss prevention assessment,
providing information required for risk management,
transfer, and naT caT modelling.
NAT CAT modelling once the hot spots have been identified through the naT caT risk Map and/or exposure
assessment, detailed modelling is the next step. Marsh has
a team of global practitioners specialising in state-of-the-
art computer modelling techniques to analyse property
risks for multiple natural hazard perils in terms of
probability of occurrence. This draws upon a worldwide
database of historical and probabilistic information
relating to earthquakes, hurricanes, tornados, and hail.
knowing the 250-year or 500-year loss level and the
average annual loss (aaL), combined with the exposure
assessment and coPE data, will give you superior
knowledge of your risks, strengthening your position in
the insurance marketplace.
NAT CAT event scenario workshops Bringing together experts from all relevant areas of risk (property, business
interruption, environmental, liability), we offer scenario
workshops that identify the worst loss naT caT scenario
and the risk and insurance implications arising from the
event. We can then identify risk transfer gaps, areas that
require additional analysis, and potential solutions. For
example, in relation to your business interruption
exposures, we can quantify your potential losses both
the maximum loss and the mitigated loss. We can also
offer specialist business continuity management advice,
specific testing of your business continuity plans, and an
audit for business interruption insurance purposes.
Environmental impairment study as a separate project or an extension of the above, our Environmental Practice will
undertake a specialist analysis of the potential likelihood
and significance of pollution and environmental damage
incidents that may occur as a result of a naT caT event.
assessing possible environmental loss scenarios as they
relate to regulatory and third party liabilities for pollution or
environmental damage alongside the insurance coverage
for environmental liabilities provides valuable information
about the potential gaps in insurance coverage and
highlights how environmental impairment liability insurance
may address these gaps.
Guy Carpenter Cat Central CAT-i bulletins guy carpenters gc analytics unit produces caT-i bulletins that
provide regular updates on events likely to incur significant
industry losses. caT-i bulletins cover major natural
catastrophes worldwide, including major uk and European
floods, worldwide tropical cyclones, and earthquakes.
NAT CAT placement This includes not only your local Marsh placement team but also the specialist international
placement services of Bowring Marsh. We can also offer
parametric loss products that do not need damage to have
occurred, but instead have weather-related loss triggers,
for example, WindX-SITM, ace Storm Tracker & Spectra,
and capital Markets Parametric.
We also encourage insureds and insurers to adopt
property sustainability principles in relation to property
policies for example, green building and resilient
repairs clauses. If reinstatement is required after an
event, why not do it in an environmentally friendly and
more robust way?
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3Claims If you suffer loss as a result of a naT caT event, we will help you through the insurance claim process and
offer support and guidance at the time you need us most.
From updates provided by Marshs disaster recovery
Portal, to claims representation and preparation,
including a catastrophe response Plan (caT Plan), this
global service provides assistance with pre-loss advice
and post-loss assistance. our international specialist
claims professionals, including the Forensic accounting
and claims Services (FacS) team, will ensure the burden
of the insurance claim is minimised, leaving you to focus
on the recovery of business.
UNISDR Making Cities Resilient We are a partner of the united nations International Strategy for disaster
reduction (unISdr) and support its resilient cities
campaign. Working with mayors and governments, we
assist unISdr in making cities, buildings, public spaces,
and infrastructure more resilient to natural hazards.
HoW you can BEnEFIT
The proactive risk advice we can offer will give you deeper
insights of naT caT exposures around the world (for your
business, your suppliers, and your customers), creating
opportunities to further improve risk management. By
exploring business continuity management needs,
business interruption insurance options, and quantifying
potential naT caT losses, you can make informed risk
management and transfer decisions.
The availability of catastrophe data puts you and your
Marsh broker in a stronger negotiating position and
provides essential information on your exposures. The
transparent and consistent data can allow for more
competitive and more accurate naT caT insurance rates,
potentially lower deductibles, and wider coverage options.
once the worst-case catastrophe exposure is
determined, you can make informed decisions on the
necessity of more detailed studies for the most heavily
exposed parts of the portfolio. Marsh can help to design
a financial and/or technical mitigation programme in line
with your business goals and objectives.
With Solvency II implementation there is an increased
need to capture naT caT exposure data relative to insurer
capital requirements. This additional information will assist
insurers to better manage their capital, allowing for more
attractive rates for your insurance cover.
WHo SHouLd Buy THESE SErvIcES?
Those with significant naT caT premium spend, claims
history, or exposure (including supply chain risks), would
benefit from these services. Those affected by naT caT
events, both directly and indirectly, will be able to choose
the appropriate items from the naT caT Pack.
Potential users for the naT caT risk Map and portfolio
exposure assessment (our initial step in our best practice
guide) will be:
Those with a large portfolio of small and mid-size sites, such as real estate clients and smaller network sites of
telecommunications.
companies with a number of service centres in which each individual site would not exceed a given naT caT
limit (the accumulation of sites in a certain risk area
might).
Those involved with mergers and acquisitions as part of due diligence.
Those with high naT caT rates or who have difficulties placing naT caT.
companies with complex supply chains that would like further information on the risks associated with their
suppliers locations.
any business with a large portfolio of locations for which placement would include naT caT cover.
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The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.
In the united kingdom, Marsh Ltd. is authorised and regulated by the Financial Services authority for insurance mediation activities only.
copyright 2013 Marsh Ltd all rights reserved
graPHIcS no. 11-0126
coNtactFor more information please contact your local Marsh representative or contact:
caroLInE WooLLEyEMEa Property Practice LeaderMarsh+44 (0) 20 7357 2777Mobile: +44 (0) 7800 [email protected]
ron dE BruIjnEMEa Property Practice LeaderMarsh risk consulting+31 10 4060394Mobile: +31 [email protected]
juLIE SPEEdBusiness development coordinatorrisk Practices, Marsh EMEa+44 (0) 20 7357 [email protected]
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BackgroundWith natural catastrophe (naT caT) events increasing in frequency and severity, and insurers scrutinising exposures more than ever, the necessity for proactive risk management and swift post-loss support is clear. This is why we have created the naT caT risk Map. This is an interactive map of your complete portfolio of assets, including suppliers locations where appropriate. From a single view you can see all your property risk data, and now this includes naT caT hazard exposures.
The increasing complexity of risks, combined with the desire for greater transparency
from markets and supervisory authorities, is placing ever greater demands upon
organisations to provide easy access to accurate property exposure information.
up-to-date and detailed naT caT information is of paramount importance, allowing
for an informed decision-making process in relation to loss prevention and resilience,
loss mitigation, and risk transfer for direct naT caT risks, but also for indirect risks
such as exposures of key customers or suppliers.
regular checks, for example, on the risk of natural hazards and the adequacy of
naT caT limits, are essential for efficient and adequate resource allocation, and risk
financing decisions.
naT caT risk Map packagedeveloped in association with Marsh,
this forms part of the naT caT pack,
our guide to best practice in risk
management and transfer of natural
catastrophe exposures. The naT
caT risk Map expands upon the
use of traditional risk Management
information systems (rMis) by
incorporating a location-based
graphical interface that integrates
location geocoding, external events,
and mapping services with your location
risk data.
The naT caT risk Map package
includes:
naT caT risk Map for risk goggles (including a report of findings)
naT caT risk Map workshop
on-map and email alerting service for global naT caT events
NAT CAT Risk MAp
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2 Natural Catastrophe Risk Map
naT caT risk Map
sTars enterprise provides complete
visibility into your property portfolio and
exposure values by tracking detailed
construction, occupancy, protection, and
exposure (cope) information; plus loss
prevention and loss control information
for each property. related documents
and images can also be attached to create
a complete profile for any asset. natural
hazard data can now be added into the
risk goggles view.
utilising advanced global geocoding
services and an intuitive user interface,
end-users are able to review and update
the longitude and latitude co-ordinates
created by the system. a collaboration
between Munich re geospatial
solutions and Marsh opens up a new
way of looking at naT caT risk. This
lets clients capture natural hazard data
for co-ordinates for assets such as oil
platforms, communication towers, and
rail crossings, or supplier locations that
are not associated with traditional street
addresses.
a report of findings is provided in the
form of a portfolio exposure assessment
(pea)*. The report identifies your portfolio
of naT caT exposures and performs
accumulation analyses in relation to
the cresTa zones in which your sites
are located. This allows analyses of
natural hazards at up to 5,000 locations
worldwide with the position of each
individual risk identified at the maximum
level of detail.
* pea provides the zoning information and maximum limits to highlight locations that require further review; the next step is more detailed modelling that looks at the likelihood of events and specific loss estimates for identified hot spots, which provides a more accurate picture.
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Marsh 3
naT caT risk Map Workshop
Bringing together experts from cs sTars and Marsh, we will demonstrate the system
and ensure you understand the data provided. There will be an opportunity to consider
all relevant areas of insured risk (property, business interruption, and environmental
liability), as well as other areas of risk that might currently be out of the scope of cover.
We will help identify the worst naT caT loss scenario, and the risk and insurance
implications arising from the event. We can then start to identify risk transfer gaps, areas
that require additional analysis, and potential solutions.
on-Map and eMail alerTing
on-map and email alerting is included for over 100 different us weather alerts, tropical
cyclone tracking, and global earthquake events. You decide the events to track and the
data is archived against your locations for future analysis.
on-map alerting helps you quickly recognise areas of critical concern. Monitoring against
your key performance indicators ensures you are visually alerted whenever specific
thresholds are met or when serious events occur.
emails can automatically alert your management teams in real-time when an event
impacts your location to speed up your response time and improve communication
across your organisation.
in addition, you will be registered with guy carpenters gc analytics unit, which
produces caT-i bulletins that provide regular updates on events that are likely to incur
significant industry losses. caT-i bulletins cover major naT caT events worldwide,
including major uk and european floods, worldwide tropical cyclones, and earthquakes.
STARS Enterprise Help About My Profile LogoutQuick Search
Earthquake Zone - Property Values
My STARS
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CS STARS LLC, a business unit of Marsh, serves the technology needs of risk managers and claims professionals, delivering integrated software and services for risk, claims, and compliance management. CS STARS primary software platform, STARS Enterprise, supports comprehensive risk management, claims administration, enterprise risk management (ERM) and compliance and safety management.
The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.
In the United Kingdom, Marsh Ltd. is authorised and regulated by the Financial Services Authority for insurance mediation activities only.
Copyright 2013 Marsh Ltd. All rights reserved.
GRAPHICS NO. 13-0165
FurTher opTionsplease note, this is recommended as
the first step in establishing a best
practice approach to naT caT. Further
detailed naT caT modelling can be
performed for the hotspots identified in
the naT caT risk Map package. property
surveys, including vulnerability and
loss assessments, will help manage risk
at each location, while providing the
relevant data for any detailed naT caT
modelling assignments.
Marsh has a team of global practitioners
specialising in state-of-the-art computer
modelling techniques to analyse property
risks for multiple natural hazard perils in
terms of probability of occurrence. Marsh
draws upon a worldwide database of
historical and probabilistic information
relating to earthquakes, hurricanes,
tornados and hail. knowing the 250-year
or 500-year loss level and the average
annual loss (aal), combined with the
data from the naT caT risk Map, will give
you a superior knowledge of your risks,
and strengthen your risk management
information and your position in the
insurance marketplace.
The workshop may expose risks or
identify information gaps that require
further consideration, including property
loss prevention, business interruption
values, environmental liability, and supply
chain or business continuity response and
recovery.
These further solutions can be discussed
with your Marsh representative or the
contacts listed here.
inTegraTion WiTh sTars enTerprise sTars enterprise includes over 20
modules. Features that can easily be
added to the naT caT risk Map package
include:
renewal data collection
property and Facility audits
incident reporting
claims Management
claims Benchmarking
CoNTACTscaroline WoolleYeMea property practice [email protected]+44 20 7357 2777
Mark holTcs sTars Business development continental [email protected]+44 20 7357 3674
ron de BruijneMea practice leader, property risk consulting & Work Force strategies [email protected]+3 1 10 406 0394
julie speedBusiness development coordinatoreMea risk [email protected]+44 20 7357 2608
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Natural hazards aNdcatastrophe modelliNg
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Marsh Risk Consulting 1
What are natural hazards?a natural hazard is an unexpected and uncontrollable natural environmental phenomenon of unusual magnitude, which can result in widespread destruction of property and lead to injury or death.
Why do they matter?
at least one type of natural hazard affects every
location on earth. a natural event is recorded as a
natural catastrophe when damage to property,
number of deaths or injuries or serious
environmental damage reaches certain
predefined criteria. organisations have also seen
an upward trend in losses from natural
catastrophes emerge over the past few years -
see Fig 1.
natural catastrophes have the ability to cause
vast and unexpected damage. history has shown
how a single windstorm, earthquake or flood can
destroy property, interrupt business and cause
severe and immediate impact on any companys
bottom line.
natural hazards pose considerable challenges for
businesses that are committed to reducing their
exposure to physical damage and business
interruption.
the risk posed to a company by natural hazards
will depend on:
Hazard the frequency and severity of events in a given geographical area
Vulnerability the extent of damage to property at a given event intensity
Exposure the exact location and value of property
Risk financing what proportion of the loss is retained by the company and what insurance or
other risk financing mechanisms are in place.
Companies seeking to protect their business from
the risk of natural hazards should re-evaluate the
level and amount of information they collect about
their exposures, what measures they are taking to
mitigate the consequences of catastrophic events
and what insurance protection they have in place.
the marsh rIsK ConsultInG solutIon
marsh risk Consultings risk management
solution to natural catastrophes focuses on:
identifying the hazard in terms of its geographical distribution and potential intensity and
frequency, in relation to the locations at risk.
quantifying the potential financial exposure in order to help clients design optimal insurance
and risk financing solutions
managing the risk through enhanced risk mitigation strategies.
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2 Natural Hazards and Catastrophe Modelling
Fig 1.
Great natural Catastrophes WorldWIde 1980 - 2011
Source: 2012 Mnchener Rckversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE - As at January 2012
0
50
100
150
200
250
300
1980 1985 1990 1995 2000 2005 2010
Overall losses (in 2011 values)
(US$
bn
)
Insured losses (in 2011 values)
Trend overall losses
Trend insured losses
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Marsh Risk Consulting 3
PHASE 1IdentIfICatIon
understanding the magnitude of your natural hazards
exposures is vital. facilities located in harms way must be
identified. damage to your companys physical assets will
interrupt operations and the ability to do business.
the preliminary examination of your property schedule
can determine:
proximity to earthquake faults;
distance to the coast;
flood exposure; and
windstorms and storm-surge potential.
using historical event records, geological and
environmental data, our specialists assess the number,
intensity and frequency of natural hazards. By analysing
the combined hazard and vulnerability information, they
estimate the maximum potential losses in property, stocks,
equipment, supplies and revenue.
often a detailed evaluation of site(s) most at risk is necessary
to better understand the business interruption profile.
data from the evaluation helps to identify the relationship
between physical assets and critical operational components
and to identify site specific risk. Clients can then used this data
to develop a cost benefit study of risk improvement options.
this phase is undertaken through:
Implementing a site inspection and analysis to gather detailed site-specific information as well as location data
and business information.
applying marsh risk Consultings assessment skills and expertise to identify vulnerable areas of buildings,
structures and equipment. several potential
improvement options can be identified for each area.
the development of a detailed cost-benefit analysis based on the cost of each option and the expected reduction in
probable maximum loss and business interruption.
phase 2QuantIfICatIon
Knowing an exposure exists and potential risks it presents
to your organisation is a beginning. In order to quantify the
risk, design optimal risk fanancing and priority mitigation
efforts potential loss levels must be developed.
scientifically sound loss expectancies can be developed.
marsh risk Consulting uses state-of-the art computer
modelling to analyse physical damage and property
business interruption risks for all types of natural hazard
perils.
the model draws upon a worldwide database consisting of
both historical and scenario-derived information. potential
losses are established by running historical events against
the current exposures of our clients. a large number of
random events are also run and the losses assessed from
each. taking into account the annual probability of each
event, levels of losses are derived that can be exceeded
with different levels of probabilities.
the statistical process, through the simulation of thousands
of random events, produces loss estimates. the input data
can range from very broad information, including general
location and building occupancy, to the highly specific,
including detailed construction characteristics.
PHASE 3manaGement
once you determine the expected loss levels, responsible
management programmes and recommendations on the
mitigation strategy can be developed. the options are
extensive and may include:
advice on transfer, retention level and supply chain adjustments
assistance on corporate and site preparedness programme upgrades and critical process equipment or
material relocation
Quality checks to ensure that the agreed mitigation procedures and measures are in place
advice on reducing natural catastrophe exposure in the most cost effective way
recommendations for further cost effective natural hazards loss control mitigation procedures.
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4 Natural Hazards and Catastrophe Modelling
World map of natural hazards
Marsh Risk Consulting 5
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the information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. the information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.
marsh ltd. is authorised and regulated by the financial services authority for insurance mediation activities only.
Copyright 2013 Marsh Ltd all rights reserved
GRAPHICS NO. 11-0113
Case studyour client needed to assess their aircraft hull exposure to hurricane for airports in texas and florida in order to
ensure that adequate insurance was in place and monitor risk accumulation. marsh risk Consulting conducted a
fully probabilistic hurricane modelling, using state of the art modelling data, in conjunction with statistical
modelling of hull losses to quantify exposures to different return-period events. after the project was completed,
the client was in a better position to understand potential losses to hurricane exposure, validate appropriateness
of insurance limits and identify airports where the level of risk accumulation had breached their risk tolerance
levels.
WorKInG WIth marsh
marsh is a recognised leader in providing both traditional and innovative solutions to clients risk
retention levels, insurance programme design and risk financing strategies. We have a global natural
hazard team of experienced professionals that can help clients to identify, quantify and manage
natural hazard risks to help them better prepare for extreme adverse natural catastrophes.
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In todays global business environment, supply chains are becoming increasingly complex and the dependence being placed on them is unprecedented.
Many organisations are under enormous pressure to reduce costs
in their supply chain and improve efficiency, whilst also finding
ways to improve customer service and responsiveness. Reducing
costs can often result in the unintentional increased exposure to
risks of disruption, and companies must understand and manage
the complex web of risks that arise. A Marsh risk survey1 identified
that although 94% of organisations agreed that supply chain is
important, only 58% have evaluated the risk exposures derived
from the supply chain. The consequences of an interruption in the
supply chain can be severe, as demonstrated by the increased
severity and frequency of natural catastrophes, including not just
loss of revenue and decreased profitability, but a reduction in share
price, and in extreme cases, permanent damage to reputation and
brand. A survey2 indentified natural hazard exposure as the top risk
in the supply chain. Marsh has therefore developed innovative
solutions to these supply chain issues, including both a rigorous
assessment service and a risk transfer product.
Although property damage/business interruption policies can
cover interruption to a supply caused by physical damage at a
suppliers premises (often limited to first tier suppliers), they do not
cover the non-damage interruptions that are so often experienced,
such as strikes, political risk incidents and port disruptions. Another
example is the eruption of the Eyjafjallajkull volcano in Iceland
that caused significant interruption to air transport. There was little
or no damage in most cases, but the disruption was significant.
Marsh has worked with leading insurers to develop insurance
products to meet this client need and fill this gap in the market.
Marsh Risk Consulting offers an assessment service that, as a
minimum, will provide all the qualitative and quantitative
information needed to obtain a quote for this policy. However, it is
recognised that the effective management of supply chains requires
a more detailed approach, encompassing risk, operational and
financial considerations. Marsh works with these separate business
functions to find the best solutions for the business as a whole. The
assessment provides sufficient data to enable informed decisions
in relation to risk transfer, but also in relation to improvements and
the allocation of resource. The assessment service includes:
risk identification;
risk measurement;
risk improvement; and
risk treatment.
RIsk IdEnTIfICATIon Marshs supply Chain Risk Management (sCRM) Practice
undertakes a comprehensive review of supply chain exposures. This
begins with the mapping of the internal and external supply chain
(including services) and continues with consideration of the key
operational processes or services and potentially critical failure
points. We can also include a natural hazard risk map of suppliers
using our exclusive broker access to a natural hazard zone database.
RIsk MEAsuREMEnT Many businesses can name the suppliers that represent the
biggest threat, but the actual financial impact is rarely
quantified. using a variety of tools including impact modelling,
forensic accounting and gap analysis, the potential loss of
gross profit is established. This is shown in terms of the
maximum exposure and, more importantly, the mitigated loss.
Supply chain riSk management and riSk tranSfer
1 facing an uncertain future, 109 uk firms polled in 2009
2 Business Continuity Institute survey (BCI) 2010
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The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.
In the united kingdom, Marsh Ltd. is authorised and regulated by the financial services Authority for insurance mediation activities only.
Copyright 2013 Marsh Ltd All rights reserved GRAPHICs no. 12-0202
RIsk IMPRovEMEnTs once the critical operations and suppliers have been established and the exposures quantified, appropriate risk management strategies can be developed in order to achieve an adaptive and resilient supply chain. using Marsh Risk Consultings expertise in business continuity, existing mitigating controls are benchmarked against best practice and a suitable plan can be established. our experts balance efficiency with fragility, helping to achieve savings while minimising the risks involved.
RIsk TREATMEnTInsurance underwriters use the risk analysis to make qualified decisions about a clients exposures and will set the rate accordingly. The programme design is customised to the needs of the business and the level of cover required. The risk improvements identified in the assessment process (once implemented) will ultimately help reduce the cost of the insurance.
THE AssEssMEnT PRoCEss
Workshops and stakeholder interviews to determine key exposures and gather sufficient qualitative and quantitative data for the insurance application.
Access to Marsh experts including business continuity consultants, the property risk practice, modelling and business analytic professionals, and forensic accountants.
The use of models to map the risks, benchmarking tools to compare existing solutions to best practice, and financial analysis in the quantification of loss.
Presentation of findings in a report that will enable the business to make informed risk management and risk transfer decisions.
The process is continuous, therefore a monitoring and control system can be devised to ensure improvements are embedded, while remaining flexible to
the dynamic nature of supply chain risk.
InsuRAnCE PRoduCT fEATuREsThe product reacts to an insured event that is not limited to physical loss or damage.
Types of covered events can include pandemic, strike, political risk or insolvency, therefore stretching way beyond existing products available in the market.
Coverage is defined as disruption or delay in the receipt of named products, components or services from a named supplier.
The loss of gross profit/earnings is measured during the assessment process and used to determine a fixed claim amount per working period.
The pre-determined fixed claim amount provides certainty of recovery levels and a more streamlined claim process.
Extra expenses over and above normal operating costs incurred by the insured
for loss mitigation can be included.
ConTACTsCARoLInE WooLLEyEMEA Property Practice Leader [email protected]: +44 20 7357 2777
MARkus GRoTHMarsh Risk [email protected]: +49 40 3769 2264
Rod RATsMAMarsh Risk [email protected]: +44 1908 846012
JuLIE sPEEdBusiness development Coordinator, EMEA Risk [email protected]: +44 20 7357 2608
key benefitS Innovative product offering to meet
a gap in the market insurance
policy to cover non-damage
business interruption risks arising
from your supply chain
Marsh can provide the full spectrum of services from
identification of key risk
exposures in the supply chain,
through to risk treatment
solutions including risk transfer
The development of a risk management plan providing
options to reduce the potential
exposure to your business, and
provide information to assist in
business and operational decisions
Encourage business alignment through executing a risk strategy
in collaboration with key
suppliers; Marsh can offer
ongoing analysis and assessment
if required
The assessment includes quantification of loss for key
suppliers to: identify the financial
impact on the business; provide
vital information required for
financial decisions; assist in the
allocation of resource; and give
insurers a basis for establishing
an insurance quotation.
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After the eArthquAke: Supply chAin reSiliency
There was devastation and loss in all regards, but
particularly in relation to property and life. The death-toll
was estimated at 15,188, with 8,742 missing and
5,337 injured.1 Evacuees totalled 108,672.
The Japanese Government estimates damages caused
directly by the earthquake/tsunami mount up to
between US$197bn and US$307bn. The direct damage
to the Japanese economy is already clear, the IMF made a
downward revision of Japans economic growth in 2011
from 1.6% to 1.4%, and there are already
102 earthquake-related bankruptcies. Ibaraki, Iwate,
Miyagi, Fukushima the worst stricken areas together
account for 6.5% of GDP. Japans GDP was U$5,300bn
in 2010.2
Our claims teams are working with clients in relation to
their direct losses as a result of the event, offering
support and claims preparation. However, it is the
indirect consequences in the supply chain that are being
felt in the rest of the world. Japan accounts for around
20% of global production of semi-conductors, 60% of
silicon wafers and 90% of bismaleimide-triazine, or
BT resin. For automobile manufacturers, supplies of
around 230, out of the roughly 3,000 parts required to
make the average car, are either running short or out of
supply. It is the indirect losses that are the focus here.3
RISk ManaGEMEnT
Competitive organisations have shortened their supply
chains by removing excess inventory or capacity,
pushing non-core services to lower cost providers,
shedding/consolidating physical assets, and reducing
third party providers or suppliers. The conflict between
efficiency and risk is apparent, and business continuity
and loss mitigation must be a top priority as all this
results in greater sourcing risk. The focus must be on risk
management, and informed risk transfer decisions can
then be made. Preparation is key, including analysis of
single points of failure (SPOFs) with these risks being:
quantified start with the generation of revenue, calculate gross profit and potential increased costs;
prioritised based on quantitative and qualitative information, and consideration of interdependencies.
It is then possible to determine the level of investment
needed to manage the risk at a very detailed level,
including consideration of risk transfer.
at 14:46 (JST) on 11 March 2011 the worst earthquake in the history of Japan struck Japans north-eastern coast. It reached a magnitude of 9.0 on Richter Scale and its epicentre depth was 24km. Following the earthquake, a tsunami battered, not just the coast, but it penetrated inland up to 10km with a depth of 25m in places. The area was then, literally, faced with meltdown as Fukushima Daiichi nuclear power plant reached a Level 7 crisis rating (the same as Chernobyl).
-
The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.
Marsh Ltd. is authorised and regulated by the Financial Services authority for insurance mediation activities only.
Copyright 2013 Marsh Ltd. all rights reserved.
GRaPHICS nO. 11-0132
RISk TRanSFER
TRaDITIOnaL COvER
Once you have a clear picture of risks and exposures
throughout the various tiers in the supply chain, risk
transfer can be considered. There are multiple insurance
implications in relation to Japan. In relation to traditional
property damage and business interruption policies, the
key value chain extension clauses include:
Suppliers extensions: this covers your own loss of profit/increased costs caused by insured damage.
key suppliers can be named (specified), and there is
an option for unspecified cover (limited capacity).
Cover is often restricted to first tier suppliers only, and
a separate limit usually applies. There are sometimes
fewer insured perils.
Customers extensions: as above, this covers interruption caused by insured damage at customers
premises. The main customers are named (specified),
and unspecified cover may be available.
aLTERnaTIvE SOLUTIOnS
With the changing business structures (supplier reliance
and complex supply chains) and changing risk events
(non-damage events such as strikes, ash cloud, cyber
crime) traditional property damage policies are no
longer sufficient.
Whilst we should concentrate on the effect on
businesses, rather than necessarily the cause, we need
to review the interaction of policies and consider the
current gaps in cover. Previously there has been little or
no cover available for non-damage related events.
Some examples are provided above of non-damage
events, but there are also aspects of damage related
events that might not be covered under traditional
policies such as loss of attraction and the rolling
blackouts imposed in Japan.
There are bespoke solutions available: we have worked
with Lloyds syndicates and reinsurers in this regard.
However, for the last two years we have worked with two
key insurers in the development of specific supply chain
solutions for non damage events.
The main features of the cover are as follows:
cover for loss of profit/increased costs of an interruption to own production/operations as a result
of an interruption in your supply chain;
includes cover for damage and non-damage interruptions (strikes, ash cloud, rolling blackouts,
restricted access);
there are limited exclusions, the aim is for wider cover;
the interruption is to a named supply and supplier (product or service);
the cause can be anywhere in the chain, it is not restricted to the first tier;
there is a pre-agreed amount (e.g. daily rate), thereby simplifying and speeding up the claims process.
For more information on how we can help you with managing your supply chain risk, in terms of the assessment process or the risk transfer piece, please contact:
CaROLInE WOOLLEyEMEa Property Practice LeaderMarsh+44 (0)20 7357 [email protected]
MaRkUS GROTH Marsh Risk Consulting+49 40 3769 [email protected]
ROD RaTSMa Uk Leader of Business Continuity ManagementMarsh Risk Consulting+44 (0)1908 [email protected]
Footnotes:
1 The national Police agency (Japan)
2 International Monetary Fund
3 The Economist Intelligence Unit, 4 april 2011, Japan business: Ripple effects
The Wall Street Journal online, 17 May 2011, Construction, Manufacturing Fall
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Business continuity management
-
Marsh Risk Consulting 1
The world is a riskier place. Emerging threats such as product recalls, with the increasing vulnerability of sophisticated global supply chains and unpredictable natural catastrophies, mean that the threat of business interruption is as great as it has ever been.
It is not just physical assets and staff that are at risk. Customer confidence, brand
and reputation are all susceptible to badly managed incidents or events. Lost
market share is almost impossible to recapture.
In many markets, failure is not an option. The investment community expects
companies to be well governed and competent in managing periods of volatility.
Insurers increasingly require evidence of effective risk management before
providing insurance cover. Market leaders expect the companies that supply
them with products and services to guarantee continuity of supply.
All risks are interconnected and businesses cannot prevent certain threats from
materialising. However, businesses can assess exposure to the risks that they
know about. The need for business to address the effects rather than the
unpredictable and often uncontrollable causes of risk is greater than ever.
Faced with a range of these unexpected and unpredictable risks, all businesses
need to prepare for the consequences. That means building resiliency into your
organisation and its supply chain as well as developing robust business
continuity and crisis management plans.
-
2 Business continuity management
Business continuity management (BCM) is all about creating assurances, so it helps when you can depend on your advisers to provide assurances of their own. When your organisation works with Marsh Risk Consulting to develop your business continuity management programme, you can be sure of solutions that prepare you for the unknown, while at the same time are fit for purpose for your organisation, its needs, and the sophistication of its current plans and programmes.
At Marsh Risk Consulting, we are in the business
of risk. We have in depth knowledge of industry
sectors and the problems that each faces.
We understand how threats to business are
changing and the pressures that this creates for
companies to refine and improve the quality of
their BCM. However, we recognise that every organisation is unique in the way that it
conducts its business. We take time to
understand each clients aims and objectives
and the context in which business continuity
needs to be established. Few organisations have
done nothing, so we also make sure that we
understand what BCM work has already been done. A key characteristic of our advice is
therefore assisting our clients in defining the
level of preparedness that they require in
different parts of their businesses for their own
unique risk profile.
This approach means that we work with a full
spectrum of clients, from single site
manufacturers developing BCM for the first time, through companies with existing BCM looking to review and exercise plans, to large and
sophisticated multinationals seeking to optimise
their investment in BCM and develop a corporate response to both strategic and operational
threats. Whoever our clients are and whatever
their aims, our goal remains the same to raise
the bar of their business continuity management.
BCM adviCe fRoM MaRsH Risk Consulting
-
Marsh Risk Consulting 3
at marsh Risk consulting, we think about our clients businesses according to their strategic
objectives and the critical processes that underpin these, and concentrate on building resilience
around these.
Fit for purpose advice and deliverables. our solutions dont come out of a box. Every client gets
advice that is appropriate for their
industry sector, size, critical issues and
level of sophistication. We recognise
and respond to challenges that may
exist within an organisation, such as
diversity between different business
units, multinational operations or
extensive supply chain dependencies.
We tailor our reporting output to meet
the culture of our clients, building
plans in reference card format, flow
diagrams, online and in traditional
paper based formats.
A focus on protecting reputation, revenue and key processes, not simply assets and facilities. Business continuity management used to be
about protecting buildings and IT, and
for some advisory companies it still is.
At Marsh Risk Consulting, we think
about our clients businesses
according to their strategic objectives
and the critical processes that
underpin these, and concentrate on
building resilience around these.
Global methodology. Wherever your business trades in the world, you can
be assured of the same approach to
BCM advice from Marsh Risk Consulting. International clients can
build global strategies and plans, safe
in the knowledge that they are joined
up and make best use of available
resources.
Defining industry best practice. our people are not just leaders in
providing BCM advice. they have helped to develop some of the
business continuity industrys
defining standards, including the
British standard for BCM, Bs 25999.
Linkages to risk and insurance. At Marsh Risk Consulting we encourage
our clients to think about risk in its
widest sense. investment in BCM may well have the potential to deliver
value to a corporate risk management
programme, or to improve the cost or
terms of insurance. We have the skills
and oversight to manage such
considerations for our clients.
key featuRes of ouR BCM adviCe inClude;
-
4 Business continuity management
ouR seRviCes
CapaBility Reviews:
Through formal reviews, we help clients to
correlate their BCM requirements with the availability and quality of their plans. This can
include an assessment of policies and protocols
at group level, including group standards and
frameworks, risk registers and crisis
management plans, as well as an assessment of
BCM implemented at operating company level. Where there are gaps, we help clients to define
what success might look like, and develop
realistic implementation plans to improve their
performance going forward. These solutions
typically include exercising plans at all levels.
exeRCising:
Marsh Risk Consultings range of exercising
solutions are focused on evolving business
continuity plans into business continuity cultures,
through training for senior executives, rehearsing
of emergency response and crisis management
procedures and testing of recovery plans.
plan Building:
We assist clients in identifying and analysing their
key business processes, and developing and
enhancing their business continuity whatever
their current levels of sophistication. A common
approach underpins this process, but plans
themselves are designed around our clients, to
ensure maximum usage and value for them.
pRogRaMMe ManageMent:
With the help of Marsh Risk Consulting, clients
develop their existing plans into programmes of
continuous BCM improvement, based on a framework linked to improving levels of
resilience. We can help to facilitate this process
on their behalf, ensuring consistency of
approach and freeing up valuable project
management resource. our people are also skilled and experienced in winning the hearts
and minds of senior managers, a vital
component of a successful BCM programme.
CRisis ManageMent planning:
Marsh Risk Consulting regularly assists clients in
developing crisis management plans, and
training staff expected to be at the apex of a crisis
with the appropriate skills to manage multiple
stakeholders under pressurised conditions.
supply CHain ResilienCe:
A business continuity strategy that ignores
relationships with key suppliers is unlikely to
work in practice, since many principal exposures
exist outside of a companys own infrastructure
or direct control. Marsh Risk Consulting helps
clients to understand the role that suppliers play
in critical business processes, to identify the
risks and key impact points, and to build
protection around them.
supply chain resilience often forms an element of our programme management approach, as
clients broaden their definition of continuity to
involve external stakeholders.
For smaller businesses that are new to business
continuity, or require less complex solutions to their
needs, Marsh Risk Consulting has a full range of
tailored services intended to assist them in
reviewing, exercising and implementing their plans.
pRoduCt Risk ManageMent:
Marsh Risk Consulting can help clients to identify
and manage the product-related risks within their
operations. We assist clients to make safer
products, reduce the likelihood and severity of
major product risk events, ensure regulatory
compliance, conduct effective recalls and
ultimately protect both clients and their brands.
-
Marsh Risk Consulting 5
maRsh Risk consulting pRovides advice to clients aRound a Range of coRe Bcm solutions.
-
6 Business continuity management
a national petRoleuM CoMpany
Need:
develop a company-wide framework of BCM, including recovery plans for the most critical
areas of the business.
Marsh solutions:
1. designed and implemented an organisation-wide BCM policy and framework, in line with
Bs 25999.
2. developed impact and risk analyses of critical business
areas, designed recovery
strategies and produced business
recovery plans, linked to existing
emergency response plans.
3. facilitated initial plan testing.
our client is an oil and gas production and refining company in the Middle East. It provides petroleum
(domestic, manufacturing, motor and aviation) fuel products. The company also exports refined
petroleum product around the world by sea.
The company embarked upon a programme of risk
identification and, in conjunction with its insurers,
identified the lack of business continuity planning as a
risk to its business. In particular, this study identified a
number of critical refinery operational areas where this
risk was extremely high. Marsh Risk Consulting was
appointed to design and implement a BCM framework across the business.
Marsh Risk Consultings BCM consultants and refinery engineering specialists worked together to
analyse the processes, impacts, risks and in-scope
production activities. The output helped the
company to understand its business better, and
which ultimately led to fit for purpose and robust
recovery plans for the critical production areas of its
refinery operations.
Case studies
-
Marsh Risk Consulting 7
our client is a major international sporting and music entertainment presenter and the owner of a number
of international sports and entertainment venues.
our client identified a requirement to become an industry leader in best practice and implementation
of BCM. Marsh Risk Consulting originally worked with our client to assess its BCM and identified the need to upgrade the existing incident management
and business recovery capabilities to complement
the high standard of emergency response
capabilities that had already been developed. A
programme was therefore developed to roll out BCM throughout the business at a flagship site with the
aim of then using this approach as a model for the
further rollout of BCM to the organisations other venues and associated operations.
These plans have been shown to be effective, helping
our client to deal with a number of serious incidents
that have occurred since the plans were developed.
Marsh Risk Consulting continues to work with this
client, to assist the organisations management to gain
the associated benefits from its investments in BCM.
MajoR inteRnational spoRts and enteRtainMent gRoup
Need:
develop comprehensive BCM, including recovery plans for the most
critical areas of the business at one of
the organisations flagship sites.
Marsh solutions:
1. designed and implemented a BCM policy and framework, in line with Bs 25999.
2. developed impact and risk analyses of critical business
areas, designed recovery
strategies and produced
business recovery and crisis
management plans, linked to
the emergency response plans.
3. delivered rehearsal exercises to senior management.
-
8 Business continuity management
Case studies Continued...
ftse 250 defenCe and aeRospaCe eleCtRoniCs gRoup
need:
develop a company-wide framework of BCM, including group-level crisis management and business unit business continuity plans (BCps).
Marsh solutions:
1. implemented a standardised approach to developing BCps at each business unit within the group, as well as creating a crisis
management plan at group level.
the group is a global engineering organisation specialising in extreme environment components and smart sub-systems for
aerospace, defence and energy markets.
When reviewing the groups overall risk management
programme in 2002, it was identified that there was no standard approach to BCM. this was mainly due to multiple acquisitions that had been made over preceding years. To meet best practice
in corporate governance, it was agreed that a review of existing
BCM requirements was necessary, with any identified gaps to be addressed.
after reviewing BCps at multiple operations globally, a lack of both consistency and quality was identified. A programme was therefore
developed and rolled out in 2003. this programme has assisted over 30 business units to implement BCM successfully, and is consistently highlighted in the groups annual report. These plans
have been shown to be effective, most notably through responding
to the Buncefield fire and explosion in december 2005, as well as being implemented for other less serious interruptions such as a
tornado in texas and a furnace fire in ohio.
Marsh Risk Consulting continues to work with this client, ensuring
newly acquired business units go through the standard BCM programme, as well as carrying out ad-hoc sample audits and
crisis management exercises with the more mature business units.
-
Marsh Risk Consulting 9
marsh Risk consultings global business continuity practice comprises over one hundred fully-employed professionals across five continents.
Marsh Risk Consultings global business continuity
practice comprises over one hundred fully-employed
professionals across five continents. Experience within
this team stretches across public, industrial and
commercial sectors, and all verticals.
We assist our clients in developing, implementing and
enhancing business continuity and operational resilience
capabilities. our portfolio of expertise includes incident management, business/operational recovery and crisis
management solutions as well as a deep understanding of
risk issues around supply chain, product recall, information
technology and communications.
our clients range from small privately-owned companies to some of the worlds largest multinational
organisations.
Marsh Risk Consulting is a thought and industry leader in
risk management and has been voted winner of the
excellence in Business Continuity in the insurance industry category at the Business Continuity awards five out of the last six years.
aBout MaRsH Risk Consulting
-
for more information, please contact:
Rod RatsMaHead of Business Continuity and Resilience eMeia, Marsh Risk Consulting+44 (0) 1908 [email protected]
The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.
in the united kingdom, Marsh ltd. is authorised and regulated by the financial services authority for insurance mediation activities only.
Copyright 2013 Marsh ltd all rights reserved
gRapHiCs no. 11-0071
-
Forensic Accounting And clAims servicesBusiness interruption insurAnce review
The potential loss from BI is often far greater than the loss
from associated property damage. The revenue of a
business will vary from year to year depending on
business performance, growth, external factors and the
competitive environment. In the current fast changing
business climate it is vital to consider how such changes
could impact the organisations exposure to revenue loss.
If the business structure has changed due to acquisitions,
significant organic growth, outsourcing or contractual
arrangements, we would recommend a review of the
insurance policy to ensure limits/coverage extensions are
still appropriate. A review of the organisations individual
exposures and recent business changes would be
performed to identify the impact on policy limits and BI
extension clauses to maximise the benefit of coverage.
IdenTIfy The key componenTssetting up an effective BI insurance programme requires
an in-depth risk assessment of both operational and
financial dimensions of a business. The outcome of the
assessment determines the breadth and basis of cover,
the BI sum insured, indemnity periods and essential cover
extensions. other components that need to be considered
include supply chain interdependencies, redundant
capacity, changing customer demands and market trends.
The fAcs team at marsh Risk consulting provides
clients with a complete BI Insurance review service.
The in-house expertise at the clients disposal includes
forensic accountants and former loss adjusters who
have worked for insurers in the recent past. We
examine all key facets of the BI insurance programme
to ensure that our clients have a clear understanding of
the BI exposures that they may face and can prepare an
effective BI presentation for the insurance markets.
ouR AppRoAchour review will identify amendments required to
coverage and provide a greater understanding of the
real risk to the organisation. highlighting how business
continuity and disaster recovery plans will mitigate any
loss ensures an accurate presentation of the risk to
underwriters and may result in premium savings.
A key element is the level of the sum insured. our
forensic accountants will consider trends and seasonality
to ensure an accurate figure and also avoid penalties and
premium leakage by purchasing too high a level of
coverage.
Business interruption (BI) insurance provides compensation when an insurable event prevents a business from achieving its financial targets, so that it suffers a loss. When combined with an effective business continuity management programme, properly structured BI insurance is a cost effective solution that goes a long way to mitigating the effects of a major business disruption.
-
The information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. The information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.
In the united kingdom, marsh Ltd. is authorised and regulated by the financial services Authority for insurance mediation activities only.
copyright 2013 marsh Ltd All rights reserved
GRAphIcs no. 11-0173
WoRkInG WITh mARsh RIsk consuLTInGmarsh Risk consulting has a unique insight into BI insurance based on our
first hand experience. Globally, marsh Risk consulting provides BI analysis
and claims consultancy for companies in all industry sectors. We bring an
unparalleled combination of insurance, accounting, engineering, business
continuity and supply chain skills to the task. The fAcs team comprises
insurance professionals who deal with major BI losses following explosions,
hurricanes and major fires. using this real experience of dealing with claims,
they consider the effect of a significant loss to test the coverage pre event.
With the assistance of business continuity and property damage experts, the
marsh Risk consulting approach is unrivalled in its practical approach to
business interruption.
ouR BI InsuRAnce RevIeW IncLudes
Direct BI analysisWe examine loss of revenue/insurable gross
profit due to an insured event at an
organisations own premises or facility. It
includes assessments of maximum
foreseeable loss (mfL), normal loss
estimate (nLe) taking into account all
mitigating actions, indemnity periods and
sums insured.
Contingent BI reviewWe identify and consider
the risk exposures from
damage at the premises
and facilities of suppliers,
customers or utility
organisations.
BI interdependency reviewWe assess the organisations overall BI loss
potential taking into consideration its
interdependent operating sites and shared
facilities. We draw out the significant
exposures and quantify risk accumulations.
BI insuranceWe review existing cover
and make
recommendations for BI
insurance programme
design.
-
MARSH
MARSH DISASTER RECOVERY PORTAL
-
MARSH
-
sub-nomenclature
Bowring marshs global property team comprises a team of over 70 dedicated brokers. We work alongside our marsh colleagues to advise clients on the optimum placement strategy for their property risks around the world.
Our key industries
financial institutions
food and beverage
hospitality and gaming
manufacturing
mining and metals
power and utilities
real estate
retail/wholesale
technology, media and telecoms
transportation (including rail)
We have a team of claims
consultants who are
responsible for coordinating
and collecting complex
claims. Both of these teams
work alongside the specialist
account broker to ensure the
client is receiving efficient
and accurate service at every
stage of the claim.
GLoBaL ProPertY
gloBAl property risKs
our brokers offer a collective
in-depth knowledge and experience
of global risk managed accounts for
companies. We also specialise in
providing natural catastrophe
solutions.
our clients benefit from our broad
understanding of evolving business
risks around the world and our
ability to provide detailed advice
regarding applicable lines of
coverage. We also work closely with
clients to address individual
challenges as they arise to
customize innovative property
solutions to suit their needs.
Wording specialists within the team
craft tailored policy clauses required
by large clients with sophisticated
business needs.
creAtiNg vAlue With volume
globally, we place total premiums of
over usd1.2 billion into the
international marketplace on behalf
of over 560 clients.
in london alone we access over 40
lloyds syndicates and companies
with whom we negotiate the
optimum terms and conditions for
our clients on a face-to-face basis.
Bowring marsh has the largest
fortune 100 portfolio in the
marketplace, reflecting our
expertise in providing complex,
global solutions.
-
North AmericAN property fAcilities
For more inFormation contact:BermudA
tom cechiNiproperty department managere: [email protected]: +1 441 299 8848
hoNg KoNg
sANdy Ngclient managere: [email protected]: +852 2301 7677
loNdoN
toNy WAllerinternational propertyplacement leadere: [email protected]: +44 20 7357 3473
tom dAviesNorth American propertyplacement leadere: [email protected]: +44 20 7357 1030
miAmi
fABio mAgAlhAeshead of officee: [email protected]: +1 305 341 5067
BrAzil
dAvid peAsenior property Brokere: [email protected]: +55 113 741 7728
siNgApore
miN ByuNg WANproperty placement Brokere: [email protected]: +65 6327 3321
toKyo
tetsuro NAKAzAWAhead of Bowring marsh Japane: [email protected]: +81 3 5334 8218
zrich
chris mcmANimoNsenior property Brokere: [email protected]: +41 44 285 9324
NAthAlAy hAusseNerproperty Brokere: [email protected]: +41 44 285 9363
ABout BoWriNg mArsh
Bowring marsh is the exclusive, specialist international placement broker for
marsh. Working seamlessly with marsh, Bowring marsh provides access for
clients, wherever they are in the world, to international insurers through its
global insurance placement platform.
BoWriNg mArsh offices
With over 260 insurance brokers located across all the major international
insurance hubs, we provide customers with options in the international markets,
driving price and coverage by putting international and domestic insurers into
competition against each other and by differentiating our customers risks,
whether they are strategic insurance buyers, claims-distressed, exposed to natural
catastrophe or buy large limits due to the nature of their operations.
placing in excess of usd2.2 billion of premium for more than 1,500 customers
annually, Bowring marsh uses the breadth and depth of its portfolio experience
and industry knowledge to innovate, customize, and broker our clients insurance
contracts with international insurers.
the information contained herein is based on sources we believe reliable and should be understood to be general risk management and insurance information only. the information is not intended to be taken as advice with respect to any individual situation and cannot be relied upon as such.
in the united Kingdom, marsh ltd. is authorised and regulated by the financial services Authority for insurance mediation activities only.
copyright 2011 marsh ltd. All rights reserved.ref: Bm.pfs.12
New York
Miami
Bermuda
Dublin
London
Zrich
So Paulo
Dubai
Singapore
Hong KongShanghai
Tokyo
Beijing
Madrid
Bowring Marsh Oces
Bowring Marsh Representatives
in addition to our tailored open
market placements for North
American clients, we offer three
facilities and also write deductible
buy downs.
Bowring marsh provides up to usd75 million of capacity with a
usd25 million excess attachment
for National Brokerage accounts.
lancashire insurance company
limited provides this products
security exclusively to our Bowring
marsh property team in Bermuda.
Xl 450 provides usd450 million of capacity with a usd50 million
excess attachment lloyds
security and london companies.
public entity specialises in municipalities. these facilities can
be activated within 48 hours
lloyds security.
-
Global Claims Practice
Lessons Learned from the Catastrophes of 2011the marsh point of View
-
i Lessons Learned from the Catastrophes of 2011
Foreword
i Lessons Learned from the Catastrophes of 2011
Lessons and RegeneRation
2011 has been characterized as the Year of the Cat. While it may not have been the largest Cat year on record, it was truly an exceptional one in terms of frequency, severity, and proliferation of issues arising from floods, windstorms, earthquakes and other disasters.
First and foremost, we recognize the human tragedy caused by such catastrophic events. indeed, we are sad to say we lost three Marsh colleagues in the Christchurch earthquake.
in the aftermath of catastrophic events, one of our roles is to help facilitate and provide the means for recovery. While not all damage and economic losses are insured, there is still a significant insurance and risk management response to the events of 2011. Catastrophes provide the insurance industry with a profound opportunity to demonstrate its value and its important role in the process of regeneration. along the way, we have all taken on important lessons that merit closer examination and sharing.
the aim of this document is to chronicle the salient issues and suggest ways in which we can deal with them better in the future. Marshs global presence makes us well positioned to analyze the catastrophes, identify individual lessons, and perhaps observe some general themes that characterize them all.
i hope you find this study to be stimulating, but it cannot be exhaustive. We are fortunate to be in an industry that is dynamic, and we will all undoubtedly encounter new challenges and opportunities. Lessons will always continue to be learned.
david Pigot
Chairman, global Claims Practice
Listening, LeaRning and deLiveRing
the magnitude and impact of the catastrophic events of 2011 were truly extraordinary. While many of the risks were understood, the scale of the devastation was unexpected, exceeding existing loss-modeling predictions. indeed, the complexity and cascade of the events in Japan show that even our understanding of the nature of risk was challenged in terms of multiple and concurrent causation.
Many of our clients were severely impacted by the catastrophes. our Claims colleagues worked tirelessly on their behalf, and i am so proud and impressed by their efforts, as well as the resilience of our clients in the face of such adversity.
in addition to addressing the immediate needs of clients affected by disasters, Marshs global resources and claims expertise equip it exceptionally well to draw and share lessons from such catastrophes. We share our perspective on what worked and where we consider the response to have fallen short.
in this way, we believe we can contribute significantly to improved preparation for enhanced resiliency during, and speedier recovery from, future catastrophic events. We look forward to engaging in a constructive dialogue with our clients and insurance partners on these issues. our mission is to learn, challenge and then shape enhanced solutions. We welcome and encourage our clients active participation in this process.
We will continue to drive leading edge insurance and risk products by listening, learning and delivering. this document is a step along that journey, and i look forward to discussing with you the issues and observations presented here.
david BatCheLoR
President, international division
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Contents
Case studies
denial of access ...................................................................................................... 2
strike, Riot and Civil Commotion or terrorism? ....................................................... 4
Flood versus storm ................................................................................................. 6
Contingent Business interruption Resulting From supply Chain Failure .................. 8
72 hours Clause ................................................................................................... 10
ContaCts ....................................................................................................... 12
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2 Lessons Learned from the Catastrophes of 2011
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Business interruption (Bi) insurance policies typically respond to loss due to insured damage at the insureds property. Contingent Bi extends to the property of others, but the nature of the damage must be of a type covered by the insureds policy.
a further extension includes cover for Bi due to prevention or denial of access to the insureds property. this is valuable, as a business may not be able to trade if a building or district has to be cordoned off, or if access to it is hindered due to factors such as:
a fire or some other peril (such as flood, earthquake)
a police or medical emergency
the outbreak of an infectious human or animal disease (for example, foot-and-mouth disease)
a hazardous material spill
the specific language of denial of access clauses will vary, but here is an example:
deniaL oF aCCessLoss, as insured by this Policy and resulting from damage or threat of damage to any property in the vicinity of the Premises, or from any threat to human life, that prevents or hinders the use of or access to the Premises, will be deemed to be loss resulting from damage to property used by the insured at the Premises for the purpose of the Business.
1 author of the 9th edition: harry Roberts
Cover for denial of access may be sub-limited to a currency amount, or to a percentage (e.g. 5 or 10 percent of the limit of the Bi section). often, there is a deductible or waiting period of a number of hours or days, so that loss due to short-term denial of access is not insured.
in fact, denial of access has historically been regarded as a relatively short-term phenomenon, and the classic Bi text Riley on Business Interruption Insurance1 refers to closure of a street in Liverpool, england for 10 days in 1960.
however, not all denial of access is short-term. Recent catastrophes in new Zealand and thailand have featured longer term issues, and this raises questions about the appropriateness of typical denial of access cover.
deniaL oF aCCess
issue
how is denial of access treated by insurers when it lasts for weeks, months or even years?
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Case studY ChRistChuRCh eaRthquake FeBRuaRY 2011
in the Central Business district (CBd) of Christchurch, new Zealand, a sizeable cordon remains in place more than a year since the magnitude 6.3 earthquake of 22 February 2011. the cordon may not be lifted until april 2012, or even later.
around 1,000 buildings in the CBd are expected to be demolished. With so many unsafe buildings, and with the threat of continuing aftershocks, the public is not permitted entry to the CBd. access is by permit only and guarded by the armed forces.
there are shopping malls, hotels, and businesses within the cordon, and a further complication with denial of access is the argument that these businesses would have been unable to operate even if they had suffered no damage at all.
a similar situation occurred in new orleans in 2005, where an orient express hotel (oeh) was damaged by hurricanes Rita and katrina. this was subsequently the subject of litigation and it was decided that even if the hotel had not been damaged, it would have suffered the same business interruption loss because of the devastation to the surrounding area.
this is what has become known as the windfall loss scenario.
there might have been a different outcome if the test was but for the event as opposed to but for the damage. the main issue, however, was how the policy should respond to the situation where both damage to the hotel and damage to the wider area were causes of the Bi loss. a recovery was made for Bi losses under the denial of access cover, but this was sub-limited (unlike that available under the overall Bi cover).
While the oeh case continues to attract controversy, it serves as a good example of how clients should consider denial of access in the context of the available Bi cover.
it remains to be seen how the new Zealand courts will interpret this issue, but it has greater relevance if there is a sub-limit for denial of access.
Lessons LeaRned
1. Check the policy test with regard to Bi being but for the damage or but for the event.
2. Check the policy for the adequacy of denial of access sub-limits, and/or their aggregation. an extended period whereby access is denied (as seen in Christchurch and thailand) can expose any limitation.
3. it is very helpful if the denial of access extension covers not just denial of access but hindrance as well. Business can suffer if a location is difficult or highly inconvenient to get to, just as much as if access was physically impossible.
4. By the same token, there may be an interruption to the business caused by threat (e.g., scared to gain entry) or simple impracticality (e.g., there may be access to an airport, but there may be no planes). this was a significant issue following 9/11 when businesses at airports claimed Bi losses due to the closure of all airspace to commercial flights; and hotels and other hospitality and travel related businesses claimed for losses due to sharp reductions in travel.
5. Controversy can also arise regarding what constitutes a coverage trigger. several insurers have asserted, for instance, that the presence of floodwaters on access roads or grounds does not constitute physical damage. they have said that flood damage to buildings, structures or other property must first take place (as seen in the blizzards of 2010 in the eastern united states, where roads were impassable due to heavy snowfall).
these observations are general and not policy or circumstance specific. it is recommended that you consult with your advisors before considering action in presenting and pursuing a claim.
dated: March 2012
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4 Lessons Learned from the Catastrophes of 2011
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all Risks policies will typically exclude terrorism. separate terrorism cover or broader Political violence cover may be available, but this does not necessarily provide certainty. the definition of terrorism as excluded may not be the same as the definition of terrorism as extended.
in addition to recoveries potentially available from insurance, care must be taken to recognize and act upon any local legislation and related requirements, so as to preserve any other form of recovery. For example, following the uk riots of august 2011, the Riot (damages) act 1886 required policyholders to register their claim for compensation from police authorities within a set timeframe (originally fourteen days), and by using a prescribed form. Failure to do so could preclude recovery under the act.
another common issue in civil unrest situations concerns the number of events and the potential application of multiple deductibles. there may be a 72 hours Clause in the policy, and the definition of an event is important, although not all policies contain a specific definition.
the situation in egypt in the early part of 2011 allows us to illustrate the sRCC versus terrorism
issue.
stRike, Riot and CiviL CoMMotion oR teRRoRisM?
issue
the 2011 public disturbances in egypt, the uk and elsewhere have re-ignited the debate that came to prominence in the 2010 thailand disturbances; namely, what constitutes strike, Riot and Civil Commotion (sRCC), and what constitutes terrorism?
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Case studY egYPt unRest JanuaRY 2011
the events in egypt began on 25 January 2011 and have variously been described as non-violent civil resistance, civil disobedience, popular uprising, revolution, and terrorism. these terms are frequently used generally and without appreciation of any insurance policy implications. however, the interpretation of these terms can have a significant impact on policy response.
the unrest is generally considered to have ended when President Mubarak stepped down on 11 February 2011.
there was much confusion regarding the definition of the events and the related insurance implications. the insurance Federation of egypt provided some clarification when it issued a statement on 8 March 2011, that concluded
Accordingly, the Federation recommends that the insurance companies should consider the claims submitted to them as per the conditions, terms, limits of coverage and exclusions of insurance policies signed with the insured in connection with the coverage of Riot, Civil Commotion and Strike Perils.
this statement prompted a flow of payments from insurers, but some claims continued to be contested for a variety of reasons, including:
the non-binding nature of the Federations statement (although it was clearly influential)
the variety of language in insurance clauses, some of which exclude civil commotion assuming the proportions of a popular rising, which introduces an additional requirement of scale
the broad definition of terrorism as stated in some policies, which might embrace activity beyond the popularly understood meaning of the word terrorism
insurer portfolio consideration, being a concern that precedent is not established for greater exposures in other territories, such as thailand
Lessons LeaRned
1. Pre-loss, compare exclusionary and inclusionary terrorism language, to check that the coverage dovetails. also consider what other coverage might be available.
2. Capture claims data and evidence of the business decisions made during and subsequent to the unrest. Close co-operati