Huge Cost of Safety Incidents

According to a 2012 report by the Energy Practice of Marsh Ltd., a division of insurer Marsh McLennan, the 100 largest property damage losses analyzed within process industries from 1972 to 2011 represent approximately $33 billion in property damage, stated in 2011 prices.

Companies with murky safety records will find employee recruitment increasingly difficult, as younger engineers will be more selective about where they want to work. Such companies may end up in a downward spiral of declining facilities and less qualified operators until disaster strikes.

Economic

Loss values, based on the cost to repair or replace assets damaged or destroyed, are stated in two manners. The original value of the loss in ‘money at the time’ is provided as well as an inflated value which is used to compare ‘like with like’. The loss amounts include property damage, debris removal and cleanup costs; the costs of business interruption, extra expense, employee injuries/fatalities liability claims are excluded from this analysis.

The direct, on-premises cleanup costs due to asbestos abatement, PCB removal, or released hydrocarbons and chemicals following a fire, explosion or other loss event have traditionally been considered part of the property damage loss. These costs, to the extent that insurance is applicable, are paid by property insurance underwriters. The loss amounts are then inflated using the Nelson-Farrar Petroleum Plant Cost Index, thus allowing for a comparison of events on a constant basis across the period analyzed.

As an industry, we would all benefit from a reduction in loss incidents and we commend this publication to you to promote discussion and learning within your organizations.

Source: Marsh THE 100 LARGEST LOSSES  1972–2011