Risk Services

Inherent Safe Design & Process Safety Management

An overview of Benchmarking and Risk Assessment by Zurich

S. Layton, P.Eng., C.Eng, M.I.Chem.E., CRM

J.A Grezlik, ARM, ASSE.

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Objective

Overview of Zurich findings of correlation between our risk grading and

claims results

Demonstrate correlation, and therefore importance of, process safety

management upon risk grading overall assessment and indirectly, loss

experience

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Background

What is Risk Engineering?

Network of nearly 1000 technical specialists in risk assessment and

management

60 Energy specialists with industry background

Visit hundreds of sites globally

Roles of Zurich‟s Risk Engineering team

Consultancy advice for our customers - risk improvement advice,

benchmarking

Technical opinion for our internal business partners - account, portfolio level

input to pricing

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How do we conduct risk assessments?

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Industry segment practice groups including Oil,

Gas & Petrochemical (OGP)

Plan

Qualified to perform (Q2P) Do

Technical risk grading algorithms with definitions

for each factor grading, since 1997

Monitor

ISO 9001:2008 Quality Management System Feedback

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Why is risk grading so important to us?

Global consistency: consistent overall assessments and advice

Measurable: prioritized advice; prioritized & targeted use of Risk

Engineering tools and resources

Benchmarking: portfolio, within industry segments ; NAICS peer groups,

within a company

Facilitates decision making for risk management (including transfer)

Zurich uses grading in portfolio quartiling for risk selection and

underwriting.

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Onshore Property Underwriting quartile

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Q4 – Bottom 25% Q3 – Lower Mid-Level 75%

Q1 – Top 25%Q2 – Mid-Level 50%

Underwriting evaluation

Excellent

Good

Fair

Poor

Ris

k E

ng

ineeri

ng

facto

r

Poor GoodFair Excellent

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Grading Contents : Oil Gas & Petrochemical Property Coverage

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Grading Risk Factor Example #1; Management Programs

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Grading Risk Factor Example #2; Work Permit System

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Grading Risk Factor Example #3; Site Layout – Process Internal

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Benchmarking – Overall Property Grading by Location

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XY Company Location Property Grading

0

20

40

60

80

100

120

140

160

180

200

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Property - 'As Is' Grading

Property - 'To Be' Grading

Grading

Poor

Excellent

Good

Fair

XY Company = 99.2

Sector = 109.0

XY Company 'to be' = 64.0

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Benchmarking – Risk Factor Comparison by Location

Graph 2 - Benchmark of XY Company vs Sector Risk Factors

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Man

agem

ent P

rogra

ms

Oper

atio

ns

Mai

ntenan

ce

Insp

ectio

n

Work

Per

mit

Man

agem

ent o

f Chan

ge

Inci

dent r

eport

ing/In

vest

igat

ion

House

keep

ing/C

ondition

Exp

osure

s

Haz

ards

of pro

cess

oper

atio

ns

Pla

nt des

ign

Pro

cess

Conditi

ons

Contr

ol Room

s, M

CCs

Site

Lay

out; P

roce

ss to

Pro

cess

Site

Lay

out - P

roce

ss in

tern

al

Atm

ospher

ic S

tora

ge

Pre

ssuri

zed S

tora

ge

Util

ity S

yste

ms

Mat

eria

l Logis

tics

Fixed

Fire

Pro

tect

ion

Pas

sive

Fire

Pro

tect

ion

Fire

Supre

ssio

n (oth

er th

an w

ater

/foam

)

Fire

Wat

er S

upply &

Dis

trib

ution

Fire

& G

as D

etec

tion

ER P

lan

Inte

rnal

Fire

Dep

artm

ent/F

ire

Team

Public

Fire

Dep

artm

ent &

Mutu

al A

id

RE F

acto

r

Risk Factors

Ind

ex

XY Company Property Risk Factors

Sector Property Risk Factors

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PSM correlation with Zurich Risk Grading

PSM element Zurich Risk Grading

direct

Zurich Risk Grading

indirect

Process safety info (2), (13), (14) (1), (12), (13), (15-21) ,

(22-26)

Employee involvement (1) (2), (5), (8), (9), (27-29)

PHA (1), (13) (8)

Operating procedures (2) (12), (18-19), (22-26)

Training (2) (7-10), (27-29)

Contractors (5)

PSRs (1), (8)

Mechanical integrity (3), (6), (8) (13), (14)

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PSM correlation with Zurich Risk Grading

PSM element Zurich Risk Grading

direct

Zurich Risk Grading

indirect

Hot work (7)

MOC (8)

Incident investigation (9)

ER planning (27-29)

Compliance audits (1)

Trade secrets (1)

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Correlation between ZRE Grading and Zurich Claims

More than 2,400 claims reviewed; dating back 9 years

Claims $$ shown are for „closed‟ claims; no customer details provided

Claims info split into two groups

Natural hazards

Prevention/mitigation; 55% of total # of claims / 50% of claims $

Analysed „non natural hazard‟ claims

Drilled down to Oil, Gas, Petrochemical and Chemical sector

PSM directly impacts those root causes which are preventable

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Correlation of Grading (NAICS 3-digit Sector) with Average Claim Cost

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0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

211

Oil and Gas Extraction

325

Chemical

Manufacturing

324

Petroleum and Coal

Products

Manufacturing

NAICS Sector (3-digit)

Avera

ge C

ost

Per

Cla

im

($ M

illi

on

s)

85

90

95

100

105

110

115

Avera

ge "

As

Is"

Gra

din

g

Average Cost

Per Claim ($

Millions)

Average “As

Is” Property

Fire Risk

Grading

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Conclusion and next steps

Our Risk Assessment gradings appear to be validated by our claims

experience; and we will be expanding this to other occupancies.

Further investigation required to determine feasibility of correlating

individual grading risk factors with claims

Commitment to PSM has significant impact on our risk assessment

grading, and claims experience.

We welcome “partnerships” in order to increase our relevance to our

customers

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References

- Zurich Grading Standards and Guidelines

- Zurich Enterprise – Oil, Gas & Petrochemical: Book of Business Analysis [Claims 01/01/2000 –

12/31/2009

OSHA Process Safety Management (PSM) standard (29 CFR 1910.119)

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© 2010 Zurich Canada Risk Services. All rights reserved.

The information in this publication and presentation was compiled by Zurich Canada Risk Services from

sources believed to be reliable. We do not guarantee the accuracy of this information or any results and

further assume no liability in connection with this publication, including any information, methods or safety

suggestions contained herein. Moreover, Zurich Canada Risk Services reminds you that this publication

cannot be assumed to contain every acceptable safety and compliance procedure or that additional

procedures might not be appropriate under the circumstances. The subject matter of this publication is not

tied to any specific insurance product nor will adopting these procedures ensure coverage under any

insurance policy.

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