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MANAGING RISKS IN A VOLATILE BUSINESS ENVIRONMENT
Lars Henneberg
Head of Group Risk Management
A.P. Moller – Maersk A/S
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Contents
• Our Business
• The Gryphon A Accident
• Transforming Risk Management
• Setting up Maersk Insurance
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Maersk Liner
Business Maersk Oil
APM
Terminals Maersk Drilling
Maersk Supply
Service Maersk Tankers Damco
Shipping Oil & Gas
Strategic growth
through the
cycle
Opportunistic
investments
Assets managed
for value
Strategic
investments Danske Bank
Höegh
Autoliners Maersk FPSOs DFDS
Dansk
Supermarked
Svitzer
Our portfolio
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• 1000 owned vessel
• 500 chartered vessels
• 60 terminals
• 26 rigs
• 626,000 boepd in 6 countries
• Exploration in 11 countries
• 108.000 employees
• Active in 130 countries
Asset heavy risk management
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• 175 miles NE of Aberdeen
• Vessel equipped with 10 point mooring system
• Vessel uses 5 thrusters controlled by a DP system
Introduction
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Incident timeline and vessel movements
4 February between 0705 and 0733 Mooring line 7 fails followed by line 6
DP system fails to maintain vessel heading
Mooring lines 4 and 5 fail Vessel moves 180 meters off station
Heading and position recovered manually
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Extent and cost of damage
Production shutdown since February 4 2011
15,000 bopd for equity
Budget October 2012 USD mio
FPSO repair 325
Subsea construct 350
PM&E 100
CAR insurance 25
Subsea deconstruct 75
Emergency costs 50
Total 925
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Underlying causes
• Manufacturing defect on a chain link
• DP failure to maintain heading
• Ineffective transfer to manual control
Power Configuration
Chain failure
DP fails to maintain
heading
Ineffective transfer to
manual control
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Where did we come from?
Decentralised organization
Limited transparency
Substantial premium spend
Budget hedging mindset
Benign claims experience
Why do we
insure?
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Our theory of value creation
To continuously reduce the Group's total cost of insurable risk by 15% p.a.*
Through insurance procurement, retention management, loss prevention, claims management, insurance governance and insurance advice
Being cost effective, fast, competent, transparent and accessible while fully leveraging the Group's position
* Applicable to 2012 and 2013
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What did we want to achieve?
Utilising our risk bearing capacity and risk appetite
Simplifying our programme structures
Avoiding dollar swapping
Reducing our exposure to market volatility
Drive mindset towards loss prevention
Dri
vin
g d
own
ou
r co
st o
f ri
sk
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Moving from "budget hedging" to active risk management
Commercially leverage Group
position
Retention management
Loss prevention
Strategic relation to insurers
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Hardwiring our strategy
Year/MM USD BU retained losses
MIAS retained losses
External market premium
Cost of MIAS capital
Total
2011 Actual 221 N/A 246 N/A 467
2012 Target 157 37 176 9 379
Year/KPI MIAS net result before tax (MM USD)
Amount of claims (MM USD)
Average age of open claims (days)
External market premium (MM USD)
2011 Actual N/A 910 690 246
2012 Target 9 87 460 176
KEY PERFORMANCE INDICATORS
TOTAL COST OF RISK
The strategy is supported by measurable and tangible targets and KPIs
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The new programme structure
$2bn
$500m
$150m
Property Damage Hull & Machinery Property Damage Control of Well (OEE) Third Party Liability Business Interruption Business Interruption Third party liability
Captive
Captive
Captive
Market
Coinsurance
Energy Marine
Market
Coinsurance
Property
Market
Coinsurance
Insurance Market
Insurance Market
Insurance Market
BU deductibles
BU deductibles BU deductibles
Risks in MIAS:
- General: Physical damage and business interruption
- Energy: Rigs, platforms, pipelines, wells and FPSOs
- Marine: Vessels
- Property: Terminals
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The business case for MIAS
Substantial annual savings due to
programme consolidation
optimized risk retention
loss prevention
Solvency capital requirements
Lean and compliant operation
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Why a captive?
Substantial risk retention without a vehicle does not work:
Requires either a captive or other risk retention vehicle
Breach of requirements in loan agreements,
JV-agreements, legislation etc.
High volatility in business units
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EXCESS INSURANCE
REINSURANCE
MIAS
Fronter
Group Risk Management
BU Risk
Insurance
MIAS in action
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