Improving Process Safety Performance from an Insurance Perspective

Energy insurance risk engineers based in the UK deliver hundreds of underwriting surveys globally each year, before we even consider those led by engineers based outside the City of London and in other global insurance hubs.

Insured operators are extensively audited by stakeholders and regulatory bodies, yet we know that, at least anecdotally, insurance underwriting surveys are very highly regarded for bringing independent third party and industry good practice advice to sites.

The main output from the survey process, the insurance underwriting report, is written for the aid of underwriters and insureds to give informed opinion of insurable risk quality. This is ultimately used to help set insurance premiums and policy conditions. And whilst there is insurance-industry guidance on what the content of underwriting reports should be, all insurance surveying organisations have their own method of rating the risk quality of a site, against what are seen as recognised good engineering and management practices.

The problem is, however, that too many sites which are positively rated by underwriting surveys have process safety incidents and property-damage losses, such as fires or VCEs, and there appears to be no direct correlation between loss-likelihood and risk-rating score. In the words of one underwriter “too many better‑than‑standard sites are having losses”.

Therefore, if we are to better serve underwriters and operators, those of us who lead the insurance survey process need to review and improve how we measure the risk quality of a site, and how we convey and demonstrate that information more effectively through the insurance underwriting report.

The price of failure could be both a decline in trust and credibility in energy insurance risk engineering, and a continued exposure to property damage losses for clients and insurance markets alike.

In response to this, Aon is proposing a significant change in the way that it measures and reports risk quality in its insurance underwriting reports, giving a far greater focus to lessons from industry losses to better inform operators and underwriters alike.

We aim to redefine the standard for rating risk quality in Energy insurance risk engineering, and this paper will guide the conference on how we propose to do this.