By GREGORY DL MORRIS, who has covered the chemical industry and issues in the financial industry for the past 20 years
One of the insurance carriers that specializes in environmental risk management in the chemicals process sector is ACE Ltd., which operates ESIS Inc. as a third-party administrator and risk-management company.
At the end of 2007, ACE acquired Hygienetics Environmental Services and added it to the ESIS portfolio. Hygienetics supports ESIS projects and ACE Environmental underwriting, but also serves commercial clients.
"We evaluate the owners' overall environmental risk," said William Hazelton, senior vice president of ACE Environmental Risk, "that includes process design, plans in place, and claims history. We identify deficiencies and set a timetable for addressing them before binding the coverage. We also document the fixes."
Hazelton stressed that the rigorous underwriting is good for the insured, the carrier, and the market. "Without it we may not be able to write a given risk at all, or might have to set higher premiums or more restrictive terms." He agreed that industry programs like Responsible Care "are helpful, and are definitely part of the equation, but every case is different."
Gerry Rojewski, vice president of ACE Environmental Risk, added that the underwriting does not result in an all-or-nothing finding. "For example, we can put sublimits on existing policies instead of shutting out a client. Once training and mitigation have been addressed, we can bump up those limits. It can be done incrementally. That is safer for the insureds, and safer for us."
FM Global, a monoline property carrier, also specializes in the chemical sector. "Our view of risk is different from many others,' " said Jeffrey Beauman, vice president of all-risk underwriting. "The process industry, except petrochemical plants, is a significant portion of our business, with an operating group and a significant portion of our engineering field force dedicated to 1,200 insured locations worldwide. We, and our clients, believe that the risks in their line of business can be managed, and that the kind of losses that grab headlines can be prevented."
Maintaining a loss-driven view, said Beauman, reveals patterns, such as "more than half of the events, by number or dollar value, are related to fire. Many fire suppression systems can handle a pool fire. But anyone in the industry can tell you how destructive a three-dimensional fire is. One simple piece of risk management is to use solid floors and curbs instead of grates to keep a fire from growing three dimensionally."
Beauman urges plant managers and chemical company risk managers to think three-dimensionally even outside their fence lines. "You think about your own facilities every day, which you should. But also think about how your facility could affect others nearby, and how they could affect you."
March 1, 2010
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