Post-Harvey Lessons For Chemical Plant Managers

One of the many hazards exposed by Hurricane Harvey occurred in Crosby, Texas, when the Arkema chemical plant suffered fires and small explosions on Aug. 31 and Sept. 1. Floodwaters caused the fires by penetrating the facility and shutting down the cooling systems designed to stabilize 500,000 pounds of highly flammable materials inside. This ultimately caused a mandatory evacuation for all residents within a 1.5-mile radius of the plant. Local news outlets reported that Arkema had no plan in place for six feet of flooding and its last risk assessment was submitted in 2013.

With Hurricane Irma being tracked at 175 miles per hour in the Caribbean, it is possible that chemical plants in the path of destruction—including Florida and the southeastern United States—may face a similar scenario. Regardless of the location of your plant, here are some tips that can help reduce potential business interruption and physical injury during a major natural disaster:
Update your risk assessment. Use Harvey as a catalyst to revisit your risk assessment, especially since new information has emerged about the potential for natural hazards or disasters that can trigger a chemical accident. As recently discussed, the best assessments do more than just feature a column of checked boxes to achieve an organization’s objectives and mitigate business interruption. “They prioritize top risks, assign risk ownership, and most critically, integrate risk management and accountability into front line business decision-making,” says Dean Simone, PWC’s U.S., Asia-Pacific, and Americas Cluster Risk Assurance Leader.

Submit the assessment to the EPA or other government-appointed body, like your state’s Commission on Environmental Quality. Your facility needs to be able to withstand significant damage to prevent further incidents and public harm. The feedback will hopefully provide some useful criticism to ensure public safety and business continuity.

According to ABC’s Houston affiliate:

In at least one of Arkema’s hazard mitigation plans filed with the federal government, plant officials acknowledged that flooding is a risk. The site sits in a FEMA “high-risk” floodplain that has flooded in the past, leading to a power failure. That time, the site only had six inches of water, a former plant worker said.

It was later revealed in an internal company timeline of events that Arkema did not move temperature-sensitive chemicals via refrigerated trucks and instead banked on its two backup systems, which failed. It seems certain that Arkema will have to consider at least six feet of floodwater when it revises its plan.

Institute an emergency plant management system. This may be included in your company’s risk assessment, and it is important that your employees also know the protocol when it comes to disaster prevention. This includes establishing the lines of authority and communication while on-site and during a catastrophe. OSHA provides guidance for chemical plant management in the event of a mass disaster.

Develop public-facing communications plans. Your communications team, led by an executive officer, should have advisory plans in place in anticipation of, during and following an emergency. The good news is that you don’t have to draft them from scratch. The Centers for Disease Control and Prevention (CDC) offers communications worksheets, templates and guides dedicated to water, sanitation and hygiene-related emergencies and outbreaks. You can customize these documents to reflect your organization’s capabilities and to alert nearby residents and businesses.

Be sure to issue advisories through all possible outlets, including social media. One thing Arkema did correctly was send press releases, incident statements and alerts via Twitter in addition to traditional outlets in order to keep as many people informed as possible.

Communicate with local authorities and emergency workers. All energy plants impact their local communities, surrounding areas and ecosystems. Your company’s hazard plans should be communicated to local fire and police departments and hospitals. This ensures that emergency workers know the potential dangers your plant faces in the event of a disaster and the steps you plan to take to mitigate them.

Eclipse Sheds Light On Western Wildfires

Jones Fire-INCIWEB

Just before American news reporters could excitingly begin covering the total solar eclipse from Oregon on Monday morning, they had to acknowledge the wildfire smoke caught by their cameras. “Wildfire Threatening the View” was one brief TV headline leading into the eclipse’s coverage. It was threatening a little more than that.

At least 600 residents of Milli, Oregon were forced from their homes due to a mandatory evacuation starting on Aug. 18. The Milli fire began Aug. 15 and has since burned nearly 7,000 acres just nine miles west of Sisters, a town in the path of the total solar eclipse, according to Central Fire Info.

Thanks to the once-in-a-lifetime event, the growing hazard received some much-needed national attention.

According to the National Interagency Fire Center, there are currently 43 active wildfires burning in the U.S., mostly in western states. With a growing number of residences and businesses expanding into wildfire-prone areas, the risk for injury and death is high. Between civilian and firefighter casualties and injuries, property damage and a host of other concerns, it seems like the potential losses outweigh most other reasons to fight them head on.

In response to the continuing threat of wildfires, experts and authorities have presented solutions that should not tempt mother nature too much.

Light Your Own Or Let It Burn

Controlled or prescribed burns are the preemptive technique that can decrease the likelihood of serious, hotter fires. They are fires started by authorities in strategic locations that eliminate dead trees and other conditions wildfires thrive on, and are easily extinguishable.

This method has been successful in certain parts of the U.S., such as Ohio, when in 2015 it played a critical role in maintaining healthy landscapes. Prescribed burns do present their own set of liability risks, however, with smoke’s effect on air quality and people’s health chief among them. Those and other environmental reasons influenced the nearly entire suspension of the practice in British Columbia in 2003. But the method has found a resurgence among B.C.’s firefighting authorities. A former Parks Canada controlled burn coordinator recently said that “people do not understand the benefits of burning,” and warned that suppressing a forest’s natural cycle, which includes fire, creates the conditions for mega-fires.

In a similar vein, the Los Angeles Times recently suggested letting the fires burn out to avoid firefighter casualties, citing statistics showing there is little that authorities can do once a fire has spread.

The New York Times echoed those sentiments, noting that some scientists have suggested redirecting funds from firefighting into projects that fireproof homes, which could better ensure community safety.

A 2016 report published by CoreLogic revealed that 1.8 million homes across 13 Western states are at extreme or high risk of wildfire damage. Additionally, according to ISO Mitigation 60% of all new housing units in the U.S. have been built on the edges of forests since 1999. With this data in mind, it might be time to invoke strategies that anticipate and harness wildfires rather than relying on reactive ones.

Tips for Managing a Hurricane Claim

Despite early predictions of a mild 2017 Atlantic hurricane season, the latest forecasts reflect the likelihood of more named storms than originally anticipated. If that is not ample motivation for risk managers to double-check their hurricane preparation, then the reality that it only takes one major storm to generate a widespread disaster should be sufficient to warrant a review of their claims preparation.
This process will not only help spot potential gaps in your insurance, but also any issues in your planning that may affect the amount and delay the timing of a claim recovery. Based on recent experience, here are some tips for hurricane claims preparation and management.

Conduct a thorough review of your property insurance. Start by checking your deductible. After a loss, the first question risk managers often get from leadership is: “What’s our retention?” You also need to see if your policy has a blanket or percentage deductible. If the latter, is it a percentage of total insured value (TIV)? Do separate deductibles apply to physical damage and business interruption? Double-check your business interruption deductible. A 2% deductible on a business interruption loss equals seven days of self-retention (365 days x 2%).

In reviewing your policy, check the definitions of covered perils. Look for specific references to “storm surge,” “named windstorm” and “flood.” You’ll also want to make sure your policy covers costs to protect and preserve insured property that sustains physical damage and addresses business interruption losses when a facility is closed to preserve or protect property.

Check fee coverage for claims preparation. In a catastrophe, you may need to retain an outside claims consultant to manage your claim; this coverage—standard in some policies and optional for a nominal surcharge in others—comes in handy for complex claims.

Risk managers also shouldn’t overlook the extended period of indemnity, which gives policyholders additional time after a damaged property is restored to regain market share. And don’t miss assessing how your business interruption coverage addresses payroll; most policyholders want coverage that treats payments to hourly workers as a fixed expense (ordinary payroll), especially during catastrophe events.

During your policy review, be sure not to miss the opportunity to pre-select your adjuster. Designate an adjuster in your insurance policy and meet with them and your insurer’s claims director or examiner before any loss. Besides informing them about your company’s operations and claim strategy, a meeting helps structure the claims process.

List your claims team in your emergency response plan. Creating a team in advance—including claim advocate, restoration company, forensic accountant, engineers and building consultants—will mean they can be mobilized immediately following a major loss event.

After a loss event, communicate with key internal stakeholders. Keep your c-suite, operations, procurement and legal teams fully informed of your loss situation and claim process. And be sure all employees have ample instruction. They will need guidance for setting up loss accounts, invoicing, tracking internal labor, inventory, fixed asset ledgers and on any purchases to help mitigate the loss. They also need to understand the sensitive nature of any discussions with insurance company representatives.

Act quickly to assess the loss. Immediately evaluate the extent of property damage and obtain recommendations on temporary repairs and remediation needed to preserve and protect property. Show the adjuster the full scope of the loss so an appropriate reserve is established.

Designate a key member of your claims team to coordinate, manage and communicate activities of emergency resources, remediation, restoration vendors, environmental specialists and other providers involved in your claim. This encompasses all site inspections and remediation, timelines, target dates, ownership of issues and accountability, and facilitates expedited reviews of damaged inventory.

Work closely with your insurer throughout the loss adjustment process, as well, to negotiate partial payments based on expected short-term expenditures.

Get outside help for complex losses. By bringing expertise and special resources, such as drones and other technology, to determine extent and scope of loss, prepare accurate damage and business interruption assessments, claim experts can make a significant difference in your recovery.

Large-scale catastrophes can involve delays in insurance adjustment and elongated downtime, which can have enduring and widespread negative consequences for an enterprise. With careful planning, risk managers can help their organizations achieve faster and more complete recoveries.

For more information on hurricane preparedness and natural catastrophe planning, visit: http://www.aon.com/disaster-response/

Going Lo-Fi At Sea May Mitigate Cyberrisk

Cyberthreats have become seaborne in recent years, and preventative measures are on the radars of governments and the shipping industry.

GPS and other electronic systems have proven to help ensure safe and accurate navigation, but they have also put digital bullseyes on ship decks. These technology upgrades have unwittingly exposed ships to cyberrisk because their signals are weak enough for remote perpetrators to jam.

When ships and crew members rely solely on GPS systems, they can be at the mercy of a cyberhacker seeking to provide wrong positions (or “spoof”), endanger the crew and their cargo, or hold the crew, cargo or sensitive information for ransom.

These risks are exacerbated by the fact that ships typically do not have automatic backup systems, and younger crew members are increasingly reliant upon the newer electronic navigation tools.

Allianz’s Safety and Shipping Review 2017 highlighted the growing threat of cybercrime in the sector, and noted the increasing level of activity in the last five years. For example, World Fuel Services fell victim to an online bunkering scam in 2014 when it agreed to participate in a tender for a large amount of fuel from what it believed to be the United States Defense Logistics Agency. Cybercriminals collected $18 million from that successful impersonation. In 2016, hundreds of South Korean vessels had to return to their ports after North Korea allegedly jammed their GPS signals.

The report noted that most maritime cyberattacks have been aimed at breaching corporate security, rather than taking control of vessels, but warned that such attacks could occur.

Captain Rahul Khanna, head of marine risk consulting at Allianz Global Corporate & Specialty, noted in the report that more, larger-scale attacks are imminent if the risks are not appropriately addressed. “We can’t put IT security on the backburner,” Khanna said. “Just imagine if hackers were able to take control of a large container ship on a strategically-important route. They could block transits for a long period of time, causing significant economic damage.”

The report also stressed that “crew education and identifying measures to back up and restore systems should be implemented” to reduce cyberrisk.

Looking Back For a Signal Forward
Some companies and governments have heeded the warnings and are identifying these indicators of attack. Preventative measures may lie in a maritime tool that had taken a backseat to the prevalence of GPS—a backup radio technology called Enhanced Long-Range Navigation (eLoran), which was developed in the United States in the mid-1990s. It has continental reach, emits strong signals via a low-frequency and relies on land-based transmitters that reveal a limited number of fixed positions. These once-limiting traits could be the automatic backup systems ships need in the event of jamming or spoofing.

On July 20, 2017, when the Department of Homeland Security Authorization Act (H.R. 2825) passed the floor of the U.S. House of Representatives, eLoran’s importance was stressed. The act includes a section titled “Backup Global Positioning System,” which features provisions for the U.S. Secretary of Transportation to initiate an eLoran system. H.R. 2825 proposes that eLoran be made available as a “reliable…positioning, navigation and timing system,” with the purpose of providing “a complement to, and backup for the Global Positioning System to ensure availability of uncorrupted and nondegraded positioning, navigation and timing signals for military and civilian users.”

Reuters this week reported that South Korea’s Ministry of Oceans and Fisheries is looking to establish the technology in a test form by 2019.

Time will tell if eLoran is the most practical and cost-efficient method to mitigate cyberthreats at sea. It seems if companies want to mitigate maritime cyberrisk now, the first steps would be to look to the technology of the past and turn on the radio.