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Exploring Facility Insurance and Inspections

Written by Risk Alive

September 3, 2020

Working with insurance companies to manage risk in high-hazard operating facilities has changed dramatically over the years. The impact of losses is significant and the costs of any loss is carried by industry sector in the form of higher premiums. It takes a whole industry, operating safely, to reduce the rates of the group.

 As of January, 2020, the global liability – cost of incidents – for refiners and petrochemical companies over the past 3 years has ballooned to $12.5 billion USD; that’s more than double the gross premiums paid to insurers (Sanicola, 2020). This means premiums are going up across the board. So, what can you do to demonstrate to your carrier that your site is best in class on safety and is a good risk to take on at a lower rate?

Insurance company’s staff well-trained risk engineers who are capable of seeing the gaps in a client’s risk management program from both process and cultural aspects very quickly.

Insurance groups use a systematic approach to evaluate your process around risk assessment and how you manage critical safety equipment in your site(s). An advantage the insurers’ risk engineers carry is the accumulated knowledge gained from working with a range of different sites they visit and companies they audit to get a very real perspective of what best practices look like. Not only do they look at the documented process, they are acutely aware of the implementation and cultural norms behind what they see on paper.

If your risk assessments are not performed well, if recommendations are not implemented using a risk-based approach, or if critical safeguards are not well understood or maintained, that could translate into higher premium costs. It has been said by many that strong process safety practices are excellent for business. Doing the right thing can not only help prevent incidents, it can demonstrate to insurers that your company is a good risk to insure.

The ability to identify critical threats and safeguards demonstrates that you know what you are doing. Many companies will identify a list of Safety Critical Equipment (SCE) and keep them in a separate system to monitor their status, maintenance and effectiveness. This is a proven approach to ensuring they will act when you need them and provides comfort to insurers that your facilities are well managed.

So, What Questions Can You Ask to Prepare for Your Next Insurance Inspection?

  1. Are our risk assessments complete? Is there anything we missed and how can we prove we caught everything?
  2. Have we identified our safety critical equipment (SCE) effectively?
  3. What are our most important SCE and how can we prove they’re well managed?
  4. Are all of our corrective actions prioritized using a risk-based philosophy?
  5. What evidence can we show that our risks are under control and well understood by all?
  6. Has the information been socialized at the appropriate levels and roles?
  7. Has a documented trail of discussions and decisions been kept?

Risk Management is Serious Business 

Having a comprehensive insurance policy is an important element in risk management and an inability to access affordable insurance can be a major limiting factor. If no underwriters will provide coverage, it may even result in losing your license to operate.

Talking about facilities in the USA, insurance giant Swiss Re had this to say: “We believe the difference is due to the operational hazard.” The Swiss Re report went on to say U.S. plants are “pushing the operating envelope.”

The best returns are made when ’pushing the envelope’ however the highest risks can also reside here. By demonstrating that your facility’s risk is well identified and well managed you can mitigate the effect of this increased risk potential and show that your facility is a sound decision for insurers.

The Intelligence You Need to Make The Right Choice

Using analytics and industry data to ensure critical threats are addressed gives you, and all stakeholders, peace of mind knowing that all critical threats are being managed. Risk Alive® holds the world’s largest collection of PHA and risk data – and has the advanced tools and technology to analyze this data effectively and efficiently.  

You can now access huge collections of data for facilities of all types: from refineries to gas plants, fertilizer production to French fry factories. This will help you identify common threats, and mitigations as well as the best strategies to protect your investments. 

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