ENERGY SECTOR APPLIES RISK LESSONS FROM PAST LOSSES
Incurring fewer major losses and enjoying reduced insurance costs as a result
Dubai, February 23, 2010 — Dubai, 23 February 2010 — Despite an increase in the size and scale of new energy infrastructure projects, national oil companies (NOCs) and other energy and chemical concerns are experiencing fewer and less-severe major losses than in previous years, new research by Marsh shows. Launched today at Marsh's National Oil Companies Conference in Dubai — the report, entitled The 100 Largest Losses, details the most significant property damage losses in the hydrocarbon industries since 1972.
Despite massive growth in the sector, the report shows that catastrophic losses at petrochemical plants, gas processing plants, upstream projects and terminal and other distribution points have declined over the last five years as companies enhance their risk management techniques.
Launching the report, Jim Pierce, Chairman of Marsh's Global Energy Practice, said: "Energy sector risk management has evolved into an applied science that is making a real difference to mitigating the catastrophic losses that were more common in previous years.
"It is important that oil, gas, and chemical companies make use of improved risk management techniques as we predict that there will be more energy sector mega-projects. The age of the $50 billion project has arrived and with it the potential for any large loss to be very costly. However, by learning from past incidents, and applying the latest risk mitigation strategies, many NOCs and other energy sector players are well-equipped to avoid the kind of catastrophic incidents that could do serious long-term harm."
Based on the use of sophisticated risk management techniques combined with a lack of natural catastrophes and plentiful insurance capacity, Marsh has predicted that NOCs could benefit from lower overall costs of risk over the next few years. Insurance costs could be up to 20% less for both the refining (downstream) and exploration & production (upstream) sides of their businesses. Companies involved in both onshore and offshore energy construction projects also stand to benefit from current market conditions.
Mr Pierce added: "All energy companies are likely to see something of a reduction of their overall cost of risk. However, the firms that have embraced the highest levels of risk management will benefit most."
CLICK HERE FOR THE LIST OF THE OVERALL 20 LARGEST LOSSES SINCE 1972
About Marsh
Marsh has over 23,000 employees and provides advice and transactional capabilities to clients in over 100 countries. Marsh is a unit of Marsh & McLennan Companies (MMC), a global professional services firm with approximately 52,000 employees and annual revenue exceeding $10 billion. MMC also is the parent company of Guy Carpenter, the risk and reinsurance specialist; Kroll, the risk consulting firm; Mercer, the provider of HR and related financial advice and services; and Oliver Wyman, the management consultancy. MMC's stock (ticker symbol: MMC) is listed on the New York, Chicago and London stock exchanges. MMC's Web Site is www.mmc.com.
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