The 100 Largest Losses 1978-2017
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MARSH REPORT March 2018 The 100 Largest Losses 1978-2017 Large Property Damage Losses in the Hydrocarbon Industry 25th edition MARSH REPORT March 2018 CONTENTS 3 Foreword 4 Harnessing the Power of Data to Prevent Losses 5 Improving Process Safety Performance by Learning from Losses 6 Downstream Losses – 2016 - 2017 9 Newly Qualifying Losses Since March 2016 14 Refineries 23 Petrochemicals 28 Gas Processing 30 Terminals and Distribution 32 Upstream 37 About Marsh 2 Marsh MARSH REPORT March 2018 FOREWORD Welcome to the 25th edition of Marsh’s 100 Largest Losses report. We hope that the information summarized in this publication proves to be a valuable resource for energy industry professionals. Given the challenges that face the energy industry today, ranging from adjusting to a prolonged period of low oil prices, to the evolution that new and disruptive technology will bring, considering the potential for serious incidents or major losses has never been more crucial. And in many cases, there are important lessons to be learned from the past. To help bring this information to the industry, Marsh has been collecting and recording data on major property damage losses in the energy industry since the publication of the first edition of this report, and now has a database with more than 10,000 incidents from across the global industry. This data can support organizations in their hazard identification activities, highlighting the particular exposures relevant to the technologies they are developing and managing these based on historical loss records. This information should be complimented by that collected and recorded on losses and near misses within organizations to further support improvements in risk management practice. Many risk improvement recommendations are based on the experience of energy industry insurers, including the experience from the major property damage losses summarized in this publication. Ian Henderson Global Energy & Power Engineering Leader 100 Largest Losses 3 MARSH REPORT March 2018 HARNESSING THE POWER OF DATA TO PREVENT LOSSES As we enter the era of big data required and their effectiveness in INSURANCE MARKET and analytics, loss data, such reducing the likelihood of the loss. as that contained within this This also informs energy industry WORKS TO IDENTIFY report, is an invaluable resource insurance engineers in their CRITICAL RISK TOPICS that enables correlations to be assessment of the adequacy of risk identified between causes of losses, controls on sites when undertaking a Members of the London insurance risk management practices, and risk engineering survey. market organization the Lloyd’s possible outcomes. This will, Market Association (LMA) have in the future, allow for more A risk engineering survey of the sites undertaken work to identify the key detailed targeting of risk reduction covered by a policy is a key part of scenarios and failures associated and mitigation investment. the placement of energy industry with the major energy industry insurance. These surveys, conducted losses that have resulted in large Despite the significant efforts in by professional engineers, review the insurance claims. This work has safety design and management hardware, software, and emergency been used to help identify the systems, catastrophic incidents response capabilities in relation to critical topics to be focused on are still happening. Could it be the insurances in place to transfer during risk engineering surveys. that the industry is not learning the risk exposure. The surveys A paper summarizing the work lessons from the past? It is also collect data to enable the was presented at the international evident that losses with common calculation of a maximum property process safety conference Hazards causes continue to occur across damage loss value (normally called 27 in Birmingham, UK in 2017.1 various parts of the industry. the property damage estimated maximum loss). Depending on This analysis used a slightly different In many of the cases examined the insurance products in place, set of data than that presented in in this report, minor incidents maximum loss values will also be this document, with a shorter time have escalated in an uncontrolled estimated for other exposures (for frame (20 years), only considering manner to result in major events. example, business interruption and onshore losses, not including natural The consequences of those events machinery breakdown). catastrophe events, and including were not significantly mitigated and business interruption in the loss resulted in major physical damage Risk engineering surveys also values applied. and other significant impacts. routinely result in the survey team making recommendations The analysis of the losses As such, we hope that this to the site managers to improve highlights some dominant themes. publication can act as a spur to risk management practices. Approximately 43% of the losses organizations to collect and share Recommendations should be linked were identified as being the result information on industry losses by to the relevant insurances being of mechanical integrity failure, and demonstrating the value of being purchased for the exposed site this percentage was higher for the able to learn from the experience of and should - when implemented losses on oil refineries. Of these others to prevent the reoccurrence - result in a significant reduction mechanical integrity failures, 70% of accidents and incidents. in the likelihood of a major loss were identified as being as a result occurring, or reduction in the of corrosion of process piping, USING RISK foreseeable consequences of a loss. primarily due to internal corrosion. ENGINEERING SURVEYS They are typically linked to the site Where external corrosion was a TO EVALUATE RISKS hardware, management systems, or cause, it was as a result of corrosion emergency response arrangements. under insulation. A significant proportion of these mechanical Examining past events can help They should also be practical and integrity failures are identified as the industry think about the proportionate, considering the being a result of an inadequate or barriers that would have prevented risk profile of the site and the scale of the potential risk benefits. and mitigated these losses. This 1 Jarvis, R. and Goddard, A. “An Analysis understanding can then be used of Common Causes of Major Losses in to identify potential major hazard the Onshore Oil, Gas and Petrochemical exposures, as well as the measures Industries”, I.Chem.E, Symposium Series No. 162, Hazards 27. Paper 34. 4 Marsh MARSH REPORT March 2018 incomplete inspection program, Engineers should continue to MILFORD HAVEN or failure to manage construction analyze the experience of accidents materials and quality assurance. and near-miss events to identify The major accident on the oil any common issues or causes. This refinery in Milford Haven in the Other topics identified as important demonstrates barriers that must UK in 1994 was compounded by contributors to losses include: be in place and working effectively the overwhelming number of to prevent and mitigate major alarms received in the control • Inadequate hazard identification. accidents. room by the panel operators, which significantly hindered their • Inadequate risk assessment of This review of the lessons from ability to correctly diagnose what safety critical tasks (for example, losses, and assurance of the was occurring. This resulted in a assessment of plant start-up to adequacy of the measures in catastrophic failure of the flare develop the procedure). place, is an important component system, the release of a cloud of • Reliance on remotely operated of any integrated process safety flammable vapor, and subsequent valves for safe isolations. management system. It confirms vapor cloud explosion which caused that the measures are focused on the major damage to the refinery. • Failure to identify safety critical correct areas to control the risk of devices. accidents. On sites where the control rooms have not been subject to effective alarm rationalization, risk engineering surveys often IMPROVING PROCESS SAFETY recommend an alarm study to eliminate unnecessary alarms PERFORMANCE BY LEARNING and ensure that, in the event of a serious incident, panel operators FROM LOSSES will not be subject to a flood of alarms blinding them to the cause of The following examples of major loss events provide the upset and preventing effective and appropriate response. valuable lessons for energy risk mitigation in the future. DEEPWATER HORIZON PIPER ALPHA The Piper Alpha disaster was a demonstration of the importance Following the Deepwater Horizon/ This year sees the 30th anniversary of clear communication between Macondo loss in the Gulf of of the Piper Alpha disaster in the UK operating shifts, recording and Mexico in 2010, which resulted North Sea that resulted in the death understanding the status of in 11 fatalities, the US Chemical of 167 offshore workers. As a result of equipment under maintenance, and Safety and Hazard Investigation the loss, and the subsequent public the major loss mitigation benefits of Board (CSB) carried out a thorough inquiry led by the Honourable Lord remotely operated valves to isolate investigation and published a Cullen, there were major changes the flow of large inventories of comprehensive report. The report to the regulation of safety in the hazardous flammable materials. included several recommendations, UK Continental Shelf oil industry with the