emerging risks - rims handouts/rims 14/erm008/1400_langman...emerging risks newly developing and...

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Emerging risks

Newly developing and changing risks with catastrophic consequences


Speaker 1:

Sandra Burmeier, Senior Risk Manager, Swiss Reinsurance Company LtdSandra Burmeier is a Senior Risk Manager in Swiss Re's Emerging Risk Management team. She is in

charge of managing SONAR, Swiss Re's tool for identifying, assessing and managing emerging risks. Prior to joining Swiss Re in 2010, she has worked as researcher and lecturer in the field of plant ecology and conservation science. She has studied biology and journalism and holds a doctorate in plant ecology.

Speaker 2:

Mark Roberton, Director Risk Management and Insurance, Nexen Energy ULC a wholly owned subsidiary of CNOOC Ltd.

Mark has over 30 years’ experience in the risk and insurance professions. He is involved in several

professional associations including as a board member on The McGannon Foundation, ICM Assurance (Barbados) and the advisory board of Mount Royal University. He sits on a number of insurer advisory panels including OCIL, Swiss Re and AIG Canada. In addition to his day job, Mark has been an instructor at both the Insurance Institute of Canada and Mount Royal University. He has lectured extensively including at the World Petroleum Congress, The Energy School in Philadelphia, Canadian and US RIMS and several captive, risk management, professional and construction conferences. He also co-instructs the Canadian section of the RIMS professional development course on captives.


What to Expect

After attending this session you should be able to…

•Increase your awareness of emerging risks within your corporation

•Consider potential vehicles to manage and mitigate emerging risks

•Identify the opportunistic side of emerging risks


EMERGING RISK MANAGEMENT AT SWISS RE


Swiss Re is a leading and highly diversified global re/insurance company

• Our financial strength is currently rated:Standard & Poor’s: AA-/stable; Moody’s: Aa3/stable;A.M. Best: A+/stable

• A pioneer in insurance-based capital market solutions, we combine financial strength and unparalleled expertise for the benefit of our clients

• We deliver both traditional and innovative offeringsin Property & Casualty and Life & Health that meet our clients' needs

• 151 years of experience in providing wholesale re/insurance and risk management solutions

The “Gherkin”, London

Headquarters, Zurich

Armonk, New York

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Swiss Re is broadly diversified by geography and product line

Swiss Re benefits from geographic and business mix diversification and has the ability to reallocate capital to achieve profitable growth

EMEA AsiaAmericas

40% 39% 21%

11.511.3

6.0

Net premiums and fee income earned1 2013 (USD 28.8 bn)

by region (in USD bn) … and by business segment

1 Includes fee income from policyholders

Source: Swiss Re


• Reinsurers operate in a risk landscape that is changing faster today than ever before:

- New economic, technological, socio-political, regulatory and environmental developments

- Growing interdependencies

- Evolving liability and regulatory regimes

- Strengthening stakeholder expectations

- Shifting risk perceptions

• This complex landscape gives rise to emerging risks: newly developing or changing risks that are difficult to quantify and whose potential impact on our business is not yet sufficiently taken into account

Emerging risks arise from an ever changing risk landscape

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In the face of change, looking back is not sufficient to prepare for tomorrow's risks

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Today

Foresight information

Tomorrow’sexposure

Historical data

Yesterday’sexperience


• Dedicated Emerging Risk Management team as part of Swiss Re's Group Risk Management function

• 4 FTEs with diverse educational backgrounds, based at headquarters in Zurich, Switzerland

• Group-wide emerging risk management framework called SONAR

• Purpose: detect early signals of emerging risks to reduce uncertainty and prevent unforeseen losses while identifying new business opportunities and raising awareness

Emerging Risk Management is an integral part of Swiss Re's Enterprise Risk Management framework

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S ystematic O bservation of N otions A ssociated with R isk


The Emerging Risk Management team owns the SONAR process and is supported by SONAR officers and SONAR experts through a company-wide network.

SONAR is Swiss Re's emerging risk management tool

Input Assessment ImplementationMonitoring &

control

Pre-assessment, prioritisation and clustering of early signals

Consolidation and interpretation (downside, upside)

Publication of emerging risk reports (SONAR SCAN, risk sparks, business sparks)

Horizon scanning

Collection of early signals from various sources

Swiss Re business and staff (web 2.0 platform)

Media, universities, think-tanks

External initiatives on emerging risks

Status monitoring (based on topic owner feedback)

Detailed assessment of topics selected as relevant by Business Units

Definition of follow-up actions (mitigation measures for downside effects, product and/or strategy development for upside effects)

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Time

Emerging risk

Unrealised opportunity Seized opportunity

Uncontrolled risk Controlled risk

Risk

spark Loss

scenarios

Business

plan

Signal is fading

Product and/

or strategy

development

Product

launch and

marketing

Development

of mitigation

measures

Implementation

of mitigation

measures

Emerging Risk Mgmt (ERM) responsible Emerging Risk Mgmt support on demand

UP

SID

ED

OW

NS

IDE

Pre-assessment,

prioritisation and

clustering

Consolidation and

interpretation of

early signals

Think

tanks

Media

Internet

External

initiatives

Univer-

sities

Swiss Re

business

& staffEarly signal

Business

spark

Input Assessment ImplementationMonitoring &

control

SONAR is Swiss Re's emerging risk management tool


• Ongoing information sharing by means of a Web 2.0 platform

• Annual summary report aimed at management levels and made available for all employees

• Annual update of the Swiss Re Emerging Risk Map (Board level)

• Presentations, webinars and knowledge sharing session sot stimulate discussions, trigger mitigation actions and support strategic planning

Emerging risk information is communicated through various internal channels to raise awareness

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SONAR SCANRecent risk perception

from Swiss Re's

employees (faint

signals)

Swiss Re Emerging Risk MapSenior expert assessment of top

emerging risks for Swiss Re

CRO ERI Risk

RadarIndustry perception of

key emerging risks

Swiss Re's emerging risk portfolio captures

risks on 3 levels:


Information is shared with external stakeholders to raise awareness and facilitate knowledge transfer

IRGC

Risk governance projects

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CRO Forum

Emerging risk radar & position papers

WEF

Annual Global Risks Report

Client SONAR

External version of the SONAR SCAN report


Exemplary emerging risk topics featured in recent SONAR publications

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Enhanced humans Air pollutionEpigenetics

Cyber vulnerability Toxic substances and workplace safety

New forms of mobility

Prolonged power blackout

Regulatory fragmentation


Conclusions

• An ever changing risk landscape gives rise to emerging risks

• In the face of change, looking back is not sufficient to prepare for tomorrow's risks

• Emerging Risk Management is an integral part of Swiss Re's Enterprise Risk Management framework

• SONAR is Swiss Re's tool for identifying, assessing and managing emerging risks

• Emerging risks remain a challenge for re/insurers and their partners, but can also offer new opportunities if managed well


EMERGING RISK MANAGEMENT AT NEXEN ENERGY ULC


ABOUT NEXEN

• Nexen is an upstream oil and gas company responsibly developing energy resources in some of the world’s most significant basins:

• UK North Sea

• Offshore West Africa

• United States

• Western Canada

• We are a wholly-owned subsidiary of CNOOC Limited

• We’re strategically focused on three businesses: conventional oil and gas, oil sands and shale gas/oil

• At Nexen, it’s not just what we do that matters − it’s how we get the job done. And the foundation of our growth strategy is the energy and expertise of our employees who are committed to working with integrity and engaging our stakeholders.

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About CNOOC Limited

• One of the world’s largest oil and gas companies, CNOOC Limited:

• holds 4.4 billion barrels in net proved reserves (as of December 31, 2013)

• estimated average daily production in 2013 was 1.12 million boe/d

• invested US$15.3 billion in capital during 2013

• has about 10,000 employees

• trades on the Hong Kong, New York and Toronto stock exchanges

• Headquartered in Beijing, China

• Operates in Asia, Africa, North & South America, Oceania & Europe

• Acquired Nexen in February 2013 for US$15.1 billion

• CNOOC Limited established Calgary as an international headquarters; management of CNOOC Limited existing operations in North and Central America was added to Nexen’s responsibilities.

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What is Emerging Risk?

• Expected, but under communicated

• New construction

• Expected, but under quantified

• Claims

• Knowable, but undervalued

• Pre-Macondo HPHT wells/Rail risk

• Risks beyond our range of knowledge

• The next big thing


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Detection of Emerging Risks

• Being close to the business/others

• Partners in the business (Legal, HSE&SR & etc.)

• General Business scans/WELD/security dashboard/business activity reports

• Strategic Risk Analysis

• Contractual Risk Analysis

• Project Risk Management

• Mergers, Acquisitions & Divestures

• Risk Control Consulting including Hazardous & Operability Study/Analysis (HAZOP)

• Above and below ground reviews


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How are risks Quantified?

• Exposure chart

• Risk mapping

• Expert advice on EMLs, conflagration & contingent exposures

• Risk tolerance and risk appetite thresholds


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Coping with emerging Risks?

• Risk tolerance and retention

• Contractual transfer (besides insurance)

• Insurance

• Captive

• Cases in point • Terrorism post 9-11

• Wind risk in the Gulf of Mexico


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Case study

• Macondo offshore Oil Spill, Gulf of Mexico USA operated by BP

• Explosion on the drilling rig Deepwater Horizon occurred on April 20, 2010, killing 11 workers

• The rig sank on April 22,2010 in water approximately 5,000 feet (1,500m) deep and was located resting on the seafloor approximately 1,300 feet (400m) northwest of the well

• Following the incident, BP started a relief well on May 2, 2010 which would take up to three months to drill

• BP started a second relief well on May 16, 2010

• The well was successfully sealed off from flow into the sea on August 4, 2010 by a “static kill” (injection of heavy fluids and cement into the wellhead at the mudline)


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What did this mean to Nexen?

• The response after the loss:

• Complete review of our insurance coverage resulting in the purchase of additional limits on high risk wells

• Additional assumption of risk due to market response post Macondo loss

• Nexen joined additional pollution response capabilities established by industry

• Extensive work done by our drilling group to assess equipment used on our wells

• Contractual risk analysis and the risk assumption rules have been reassessed; rethink if Nexen wanted to be operator on high risk wells

• Redid Strategic Risk Assessment (SRA) to capture the extreme nature of events that are possible


Questions, Final Comments and Contact Information

Sandra BurmeierSenior Emerging Risk ManagerSwiss Reinsurance Company LtdMythenquai 50/608022 ZurichSwitzerlandPhone: +41 43 285 9506E-mail: [email protected]

Mark RobertonDirector Risk Management and Insurance Nexen Energy ULC801-7th Ave SW Calgary, AB, Canada T2P 3P7

Phone: 403-699-5172E-mail: [email protected]

mailto:[email protected]


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