It was a record breaking attendance at the AIRROC Spring Membership Meeting on March 5 & 6. Hosted at the offices of Norton Rose Fulbright in New York City, members held meetings and also heard from great education panels. Read on for highlights of this particular session.
Texas petrochemical engineer Phil Watters of Rimkus and Swiss Re’s Claims Vice President Mike Diggin discussed the environmental risks of transporting oil & gas via pipelines, storage facilities, railways, motor, port operations, and marine.
Watters’s astute oilman observations and tremendous expertise was very well received by the audience. He colourfully explained, in layman’s terms using shaken up Coke cans, the extreme volatility of some fracked crude oil that significantly increased the rail transport risk. He also noted that the 1940s-50s era pipeline utilized welded steel, which contributes to the risks of aging infrastructure. Furthermore, Phil outlined Cushing, Oklahoma’s 90 million barrels of crude oil storage capacity and the catastrophic risk presented to the U.S. economy if a massive, hydrofracked, wastewater disposal-induced earthquake were to occur at the “oil crossroads of America.”
Watters shared his extraordinary insights on the many different types of environmental claims on which he has worked on behalf of insurers, including testifying on many of those addressed in the PowerPoint presentation.
Diggin discussed specific claim examples, including the San Bruno and Santa Barbara pipeline explosions, Aliso Canyon gas storage leak, Lac Mégantic train accident, and Tianjin port explosion. Diggin noted that a lesson learned for the Aliso Canyon gas storage leak was the hundreds of millions of dollars spent on relocation costs.
In addition to outlining specific claim examples, Diggin:
- Reviewed the various types of policies that respond to transport losses;
- Parsed policy wording (e.g., pollution exclusion with named peril and time element exception);
- Noted coverage issues (e.g., where many different entities are involved, whose policy(ies) respond and who is the “insured”?);
- Explained the contractual relationships between the oil & gas well owner/operator and transport firms, as well as the distinction between historical pre-existing contamination and new contamination;
- Detailed how are facilities ‘locked down’ in advance of a NatCat and appropriate cleanup standards; and
- Shared Lessons Learned (e.g., accumulation risk and risk management).
Diggin further noted that insurers increasingly utilize technology, such as Rimkus’ drone fleet to expedite inspections of some losses in locations with limited access. He closed by observing that (re)insurers should be very diligent in their environmental underwriting, utilize careful standards, assess their portfolio and severity/accumulation exposure, and continually update their price and risk models.
Providing tremendous synergy to this in-depth discussion, Swiss Re Underwriter Mike Meadows then contributed to Swiss Re’s formidable industry thought leadership with additional sage observations to further the lively discussion and knowledge exchange. Diggin simultaneously wove ten timely and topical Swiss Re reports into the presentation.
Watters and Diggin were among 45 expert speakers on 17 Insurance Risk panels at the 34th annual Environmental and Emerging Claims Managers Association conference in Orlando on May 1-3.
Refer to page 30 in the Spring 2019 issue for article. https://www.airroc.org/assets/docs/matters/AIRROC-MATTERS-Spring-2019-Vol-15-No-1.pdf