Energy Sector's Largest Losses Occurred in Last Two Years: Marsh Report
New York | May 06, 2020
Ageing Infrastructure, High Utilization, Less Regulation, And Declining Standards Contributing Factors
According to a new report by Marsh JLT Specialty, which is part of Marsh, the world’s leading insurance broker and risk adviser, eight of the largest-ever property damage losses experienced by the global hydrocarbon extraction, transport, and processing industry occurred during 2018-19.
In the 26th edition of the report, 100 Largest Losses in the Hydrocarbon Industry 1974-2019, Marsh JLT Specialty estimates that property damage losses incurred in 2018-19 totalled US$4.5 billion, one-tenth of the overall total of US$43.2 billion for the one hundred largest losses incurred in the last five decades (based on property values at December 31, 2019).
Several of the largest losses in last two years stem from refineries and petrochemical assets, particularly those built in the 1960s or earlier: refineries account for 50%, while petrochemicals account for 25% of the new losses. The past two years have contributed more incidents (four) to the top-20 largest losses than any other two-year window for 30 years, since 1988-89.
According to Marsh JLT Specialty’s report, contributing factors to this spike include a reduction in global engineering standards, less stringent regulation, the higher utilisation of certain facilities such as refineries, and ageing infrastructure.
Andrew George, Global Head, Energy & Power Practice, Marsh JLT Specialty, commented: “The past two years have seen a high number of large property damage losses across the energy sector. These losses can take a long time to recover from, especially with additional delays likely to result from the global Coronavirus pandemic, and could even mark the end for a site.
“Despite the lessons that can be learned from these events, many energy companies’ business resilience strategies continue to lag. With plants older than 30 years more likely to experience losses, the global energy industry needs to address the changing risks of older refineries and petrochemical plants. Regardless of age, paying attention to areas such as systems of work, inspections, and fireproofing can have a significant impact on mitigating the risks, reducing the costs and, ultimately, the financial and operational impact of any incident.”
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