28th Issue - December 2014

News from the International Association of Engineering Insurers

In this edition

Nr. Topic Page

1 News from the Executive Committee 2 2 What is new on www.IMIA.com 3 3 Terrorism Insurance 3 4 Interesting publications 4

4.1 Swiss Re – Lessons learnt from Christchurch 4 4.2 Allianz - Skyscrapers and Supertall Buildings 5 5 Learning from Losses 5

5.1 Road Bridge under Construction–(Israel) 5 5.2 Road Bridge Collapse in Operation (USA) 6 5.3 Crane Collapses during Assembling 8 5.4 Tilted mobile cranes (Netherlands) 8 5.5 Crane collapse at CSP plant under construction, South Africa 9 6 Risk Management in Iceland 10 7 One last word – Invitation to share experience 10

IMIA NEWS

Bridges are not for eternity, some collapse in construction, some in operation – lessons for underwriters – see chapter 5 - Losses.

1

1. News from the Executive Committee

The EC had its last meeting on 21stNovember 2014in Munich. The Minutes of Meeting can be found on www.imia.com(login necessary). Here are some of the key points:

• The 47th Annual IMIA Conference, which took place in Cannes/Mandelieu, France from Sept. 20th – 24th, 2014, has been a great success. The feedback received from the delegates has been excellent in every respect.

• There are 6 new working groups which started their activity already at the conference on France. They will present their results at the next annual IMIA conference in Mexico.

• The topics are :

Nr. Topic Chairman/-woman

90 (15) SRCC - Strike, Riot, Civil Commotion Dieter.Spaar, HDI-Gerling

91 (15) Combined Cycle Power Plants and Boilers revisited Mamoon Alyah, LWG

92 (15) Claims Protocol Christian.W.Mueller, XL Group.

93 (15) Rolling Stocks Darren Smart, Liberty

94 (15) Waste to Energy Andy Cain, HSB

95 (15) Stadiums Marina Zyuganova, Renaissance Ins.

• The preparations for the 48th Annual Conference in Mérida/México in 2015 are

underway. More information will be provided via email and in the next issue of IMIA News Sheet in March/April 2015.

• For the 49th Annual Conference in 2016 a letter of intent has been issued.

• The IMIA Academy has become one of IMIA’s core competences. The 3rd IMIA Engineering Training Course will take place again in Berlin, from March 9 – 13, 2014. Registration for employees of members is underway and nearly complete. A few registrations may still be accepted. A course for 2016 is already under consideration.

• The EC also discussed and decided a roadmap for the next 18 months of IMIA.

• The EC is pleased to welcome following new members in IMIA :

- Advance Hellas, Athens/Greece - Anadolu Insurance, Istanbul/Turkey - China Re Beijing/China - Iskan Insurance Cairo/Egypt - Meqa Sigorta, Baku/Azerbaijan - Miller International, Caracas/Venezuela - Pak Kuwait Insurance, Karachi/Pakistan - RuV Reinsurance, Wiesbaden/Germany - Zurich Brazil, Sao Paulo/Brazil

2

2. What is new on www.imia.com

The following documents have been placed on www.imia.com during the last three months:

• all papers that have been presented and discussed at the Cannes Mandelieu conference in France: o Market figures2013 of the IMIA world – Thierry Portevin, Allianz AGCS o WGP 84(14) Solar Thermal Power Plants - Manuela Baroncini, Swiss Re CorSo o WGP 85(14) Biomass Plants - Stephanie Watkins, HSB Engineering o WGP 86(14) Smart Grids – Daniel Chui, SCOR o WGP 87(14) Access Roads - Matia Cazzaniga Zurich Insurance o WGP 88(14) Holistic Covers in Engineering Insurance - Michel Vilijn, Amlin Insurance o WGP 89(14) Sustainability Aspects in Engineering Underwriting - Holger Hillebrand,

Partner Re o New Offshore Code of Practice for Wind Farms – Guido Benz, Swiss Re CorSo

• the minutes/ a summary of the 47th Annual Conference – Cannes 2014 • IMIA Premium and Loss Statistics 2013 • two external papers : o EP 50 – Powergen Europe 2014 – “Gas Turbine - Short and Long Term Operation and

Failure Mechanisms o EP51_Unpredictable Ground Conditions by S Artopoulos, Advance Hellas

• IMIA_Website_Statistics_2014_10 • IMIA Calendar 2015 - under Photo competition • photos from the Cannes Conference • the minutes of the last EC meeting • and a few slight improvements on the Knowledge page were implemented.

3. Terrorism Insurance – Underwriters: times change fast

3.1 Senate Adjourns without Renewing TRIA Wednesday, December 17, 2014

“The Senate last night adjourned for the year without voting to renew the Terrorism Risk Insurance Act, which will expire on Dec. 31. The bill had been blocked in a procedural move by outgoing Sen. Tom Coburn (R-Okla.), who objected to the provision in the TRIA bill establishing a national registry for insurance agents and brokers, NARAB. With the House having already recessed, Senate Minority Whip John Cornyn (R-Texas) told news outlets that there will not likely be a stop-gap bill to extend TRIA. However, he did state that rewinding TRIA is expected to be a priority in the 114th Congress, which will convene on Jan. 6. What does Congress' failure to renew TRIA mean? Large commercial projects where the lender requires terrorism coverage could be in default on January 1, 2015, unless alternative coverage can be found. New projects where terrorism coverage is required will be postponed until the developer and the lender(s) decide how to proceed. In addition, as reported in the April 2014 Treasury Report on TRIA, rating agencies may write down commercial asset backed securities. TRIA and NARAB continue to be top legislative priorities for the ABIA and we will renew efforts to ensure both are passed in the new Congress.”

http://bankinsuranceconnection.aba.com/2014/12/senate-adjourns-without-renewing-tria.html

3

Find more under: http://www.propertycasualty360.com/2014/12/17/shock-dismay-and-disappointment-pc-insurance-indus

and under: http://www.iii.org/article/understanding-terrorism-insurance

and last but not least: http://www.willis.com/Documents/Publications/Services/Political_Risk/Terrorism_2013_FINAL_web.pdf

On Jan 8th we had to actualize this information and this may be a useful lesson in ephemerity for underwriters – so research yourself when you actualize your risk assessments. On Jan 8th we received this information:

3.2 US. Senate votes to renew terrorism insurance program U (Reuters) - The U.S. Senate on Thursday voted to extend for six years a federal terrorism insurance program sought by owners and developers of office buildings and shopping malls, after lawmakers allowed it to lapse at the end of 2014.

Senators voted 93 to 4 to renew the program, which was created following the Sept. 11, 2001, attacks. Lawmakers failed to extend it before the program expired last year, so they scrambled to reauthorize it quickly after returning to Washington this week.

The U.S. House of Representatives approved the plan on Wednesday. President Barack Obama, who must sign it for it to become law, is expected to do so.

The program has been renewed twice before but has never been needed. The bill approved on Thursday doubles to $200 million the losses insurers must suffer before the backstop kicks in.

See the complete information under http://www.reuters.com/article/2015/01/08/us-usa-congress-insurance-idUSKBN0KH20Q20150108

4. Interesting publications

4.1 Swiss Re – Lessons learnt from Christchurch

Soil Conditions and Ground Behaviour deserve a closer study by underwriters. Whilst there is a new and very interesting External Paper on Unexpected Soil Conditions on our web site under http://www.imia.com/wp-content/uploads/2014/12/EP51_2014-Unpredictible-Ground-Conditions-by-S-Artopoulos.pdf, now Swiss Re experts pinpoint in a new publication entitled "Small quakes, big impact: lessons learned from Christchurch", the reasons for the rocketing claims costs and propose ways of mitigating such risks in the future. Among their recommendations are that insurers should conduct “what-if” scenarios based on the Christchurch experience. In their view, these exercises also need to include examination of policy wordings. Swiss Re experts say stronger than expected soil liquefaction overwhelmed claims assessors on the ground. Loose insurance policy wordings are among the reasons, why a series of earthquakes in New Zealand during 2010 and 2011 has now become the second most costly ever. http://media.swissre.com/documents/lessons_from_christchurch_web.pdf

They also point to how the sheer number of insurance claims submitted threatened to overwhelm the assessors and claims adjustment experts on the ground. As a result, rigorous assessments were not always possible which left them susceptible to challenge later on and made the whole process more costly. Claims costs, the report's authors say, have also ballooned as a result of lengthy negotiations with claims advocates brought in on a contingency basis

See more under: https://openminds.swissre.com/stories/745/?hootPostID=18acc58c86192d973b5de469e64cd3af

4

4.2 Skyscrapers and Supertall Buildings In 2012 the working group presented their paper at the Annual Conference 2012 in Rio de Janeiro. It can be found and downloaded in the IMIA online Library – which is accessible to the public - under http://www.imia.com/wp-content/uploads/2013/02/IMIA_Working_Group_Skyscrapers_final_paper_Sept_2012_b1.pdf. A new publication of Allianz takes up this highly interesting and challenging subject in a new publication “Supertall Buildings – Construction Risk Assessment in the 21st Century” which you can find underhttp://docs.allianzebroker.co.uk/PDF/AC/General/Supertall-Buildings-Bulletin.pdf.

5. Learning from Losses

Learning and lessons in life come more from our losses than from our wins. And our growth and forward movement arises more out of our mistakes and mishaps, than out of what we perceive as our smart decisions and choices. An expert writes: I became much better at political campaigns by analysing my losses, or studying the losses of others, than I did from the wins. http://abcnews.go.com/blogs/politics/2013/06/learning-from-loss-in-life-and-politics/

5.1 Collapse of a Crane at a Road Bridge under Construction

Our friend Alon Eisenberg from Israel contributed this photo of Motza Bridge to IMIA’s Annual photo competition. The bridge is part of renovation of the highway Nr.1. It consists of two parallel bridges, which will have 3 lanes for each direction, a length of approx. 850 m and with spans of 36 to 85 mtrs. It was designed as a cantilever bridge made of precast concrete “box” girders.

On 08.08.2014 Friday, as part of renovation of Highway No.1, a bridge crane (Gantry), placing metal links collapsed – one worker was killed, some damage occurred to the bridge under construction as well.

The construction method relies on leverage on the existing bridge parts, the segments weighing 100-80 tons. It is assumed that one of the rollers, on which the crane rested, was broken, or a pin connector was disconnected, so the crane rolled back and collapsed.

Damage to the bridge itself is believed to be minor.

5

5.2 Collapse of a Road Bridge in Operation

We choose an example from 2007 as the lesson is the same then and today. Minnesota State Bridge IW 35 On August 1, 2007, the bridge suddenly collapsed, killing 13 people and injuring 145. The bridge was Minnesota's fifth busiest, carrying 140,000 vehicles daily.

6

Before (2006)

After Aug 1st, 2007

After a formal investigation which took more than a year the National Transportation Safety Board said the cause of the I-35W Mississippi River bridge tragedy was a simple design flaw in the bridge's gusset plates -- metal plates that help connect one steel beam to another. They noted that too-thin gusset plates ripped along a line of rivets, and asserted that additional weight on the bridge at the time of the collapse contributed to the catastrophic failure. When the Minnesota Bridge collapsed in 2007, approximately 25.4 percent of the nearly 600,000 bridges in the U.S. were considered either structurally deficient or functionally obsolete. By 2011, the number dipped still leaving to 23.8 percent, nearly 150,000 bridges in the same categories.

7

For more info see: http://en.wikipedia.org/wiki/I-35W_Mississippi_River_bridgehttp://abcnews.go.com/Blotter/bridge-collapse-anniversary-safe-drivers-now/story?id=16907710http://edition.cnn.com/2010/US/08/23/minnesota.bridge.settlement/

For 100 more bridge collapses see also:http://content.time.com/time/photogallery/0,29307,1649646_1421688,00.html

5.3 Crane Collapses during assembling On Oct 8th, 2014 – Affoltern/Albis in Switzerland two cranes collapsed during assembling caus-ing damage to surrounding property (cars, trucks, buildings). The loss is estimated in the millions CHF – the cause of loss is still under investigation and not yet published. An interesting lesson and a good illustration to our paper which had been presented at our Annual Conference in New Delhi in September 2013 (GP32) - Tower Cranes - Technical and Insurance Risk Management See: http://www.imia.com/wp-content/uploads/2013/09/EP48-+-GP32-2013-Tower-Cranes.pdf

5.4 Tilted mobile crane Netherlands

And here a tilted mobile crane in Jsselstein near Utrecht/Netherlands – Damage also to surrounding property.

http://www.handelsblatt.com/die-welt-in-bildern-blickfang/8906950.html?slp=false&p=25&a=true#image

8

5.5 Storm causes large crane to collapse at Abengoa's CSP plant under construction in South Africa

The Project consists of the construction and operation of two greenfield concentrating solar power (“CSP”) projects near the towns of Upington and Pofadder, in South Africa’s Northern Cape Province, by Abengoa Solar, Abengoa Solar’s parent company, Abengoa S.A. (“Abengoa”) is a leading developer of renewable energy projects. CSP is a term used to describe a variety of technologies by which solar energy is concentrated onto a receiver to heat steam for use in industrial or electricity generation applications. !Khi will use a power tower CSP design. The power plants will sell electricity to the state owned utility, Eskom, under twenty year power purchase agreements. !Khi is a 50 MW steam receiver power tower CSP plant, with approximately 2.0 hours of steam storage, located 15 km from the town of Upington with a total provisional estimated cost of ZAR 3.9 billion (approximately US$445 million). The solar plant will feed power into the Eskom 132kV transmission line located approximately 5 km from the site. Here is an artist’s vision of the planned project.

Project description acc. to: http://ifcext.ifc.org/ifcext/spiwebsite1.nsf/ProjectDisplay/SPI_DP31083

What had happened on Nov. 3rd, 2014?

As it looked after the loss on Nov. 3rd, 2014

9

A severe storm with high speed winds seems to have caused the crane to fall at the Concentrated Solar Power plant (CSP) in Upington Abengoa under construction. Two persons were killed and seven injured.

The roughly 200 meters height crane, the 5th biggest in the world, collapsed and fell over different office buildings located at the tower foot. According to witnesses, the tower structure has been seriously damaged.

http://www.csp-world.com/news/20141104/001395/two-killed-and-7-injured-accident-abengoas-csp-plant-under-construction-south

6. Risk management in Iceland

Let us hope they mean “smaller” steam eruptions and not those like this one of Aug. 3rd, 2014

7. Finally, one last word:

Our News Sheet depends very much on your feedback as well as on your suggestions and recommendations. Please let us know about interesting losses & claims and developments in your markets. No need to be concerned that we will breach any confidentiality instructions that you give us. It goes without saying that we will comply with your needs and wishes. Please, send URL, book recommendations/photos to the secretariat:

hhm 31.12.2014

10