IMIA Working Group Paper 106(18) Construction in ......IMIA Working Paper 106(18) - Construction in Mountainous Regions • A 130 MW Hydro Power Project in Pakistan encountered 1 in

CONFIDENTIAL

Zurich Commercial Insurance Middle East

IMIA Working Group Paper 106(18)Construction in Mountainous Regions3rd September 2018Richard Gordon

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IMIA working paper 106(18) Construction in Mountainous regions – Singapore 2018

IMIA Working Paper 106(18) - Construction in Mountainous Regions

The Working Paper

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Agenda

1.0 Introduction of Team Members

2.0 Mountainous Regions – Outline of the Paper

3.0 Types of Projects Considered

4.0 Natural Catastrophe (Nat Cat) Exposures

5.0 Technical Exposures

6.0 Underwriting Considerations

7.0 Claims & Lessons Learnt

8.0 Conclusions

9.0 Questions and Answers

Agenda


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Richard Gordon, Zurich Insurance Company Ltd.

Andrea Belli, Swiss Re Corporate Solutions

Manuel Bezjak, Swiss Re Corporate Solutions

Tatiana Garbelini, CHUBB

Mark Allan, HDI-Global

Mahmood Ahmed, Hamid Mukhtar & Co.

Auditee Dutt, Zurich Insurance Company Ltd.

Heiko Hammacher, Helvetia Versicherungen

Working Group

IMIA EC Sponsor: Guido Benz, Swiss Re Corporate Solutions


1.0 The Working Group Members

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2.0 Mountainous Regions

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Development

Research was very extensive during which we evaluated the wide varietyof projects that could be encountered.

The difficult element of this project was not to repeat parts of previousworking groups and only to cover risk types that occur in these specificenvironments. For example it could be said tunneling in mountainousregions may have a lot of common aspects of tunneling in urban areas.

Modest sum insureds in monetary value, however we also came acrosssome ‘Mega’ projects that that may for instance that may run for severalhundred kilometers, crossing several countries.

Soon became apparent that Leisure, recreational risks such as cablecars, viewing galleries, ski stations and associated facilities were quitecommon.

The majority of the projects generally are the Contractors/Erection AllRisk Covers with TPL. Delay in Start up (DSU) and Advance Loss ofProfit (ALOP) were mainly encountered in Hydro schemes.

Lessons learned from Claims examples.

3.0 Types of Project Considered


Development of the Paper

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3.1 Types of Project Selected


Ski Stations and Tourist attractions generally incorporating peoplemoving transport systems such as cable cars

Railways – manly for purpose of tourist attractions and viewing points

Power and Mobile Telecom transmission systems

Avalanche protections schemes

Retaining walls and slope protection in mountainous terrain

Hydropower and Dam projects

Utilities and Pipelines installations

Temporary works schemes and use of specialist plant and equipment.

Types of Projects

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3.2 A typical leisure and recreational type riskGolden Bridge – Iconic Viewing Gallery,Vietnam.

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3.2 One of the steepest railways in the world

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3.3 Trans Adriatic Pipeline Project


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3.4 Lintahl Project in Switzerland


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Nat CatExposure

4.0 Natural Catastrophe Exposures

Respect for the mountains – many risks which are beyond the projectscontrol. Uncertainty and Risk Transfer.

Very challenging terrains in terms of access and servicing. High costs!

Weather conditions - Long term seasonal effects(some projects maybenot accessible for 6 months a year). Much discussed impact of Climatechange and how weather patterns are becoming less predictable.

Limited time to prepare for such events as is the case for most Nat Catevents

Devastating consequences on Humans and physical damage to projects


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4.1 New Zealand – South Island Earthquake


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4.2 Weather – Impact of Snow Working at High altitude

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4.3 Damage From Avalanche


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• Type of Outburst Flooding which occurs when water damned by a glacier or moraine is released

• Failure can happen due to erosion and build up of water pressure, an avalanche of rock, earthquake, large portion of Glacier breaks off and displaces water in a glacial lake at base.

• Impact of flooding can be seen in some of the losses in later section.

4.4 Glacial Flooding Outburst Flood (GLOF)

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Technical Challenges

5.0 Technical Challenges

Very good experience in the working group team with the exposures thatare associated with projects in mountainous regions.

Geotechnical and ground conditions are always key and Landslides inparticular are sometimes an issue.

With projects becoming more challenging , experienced contractors andresources to deliver such projects in remote locations.

Interaction with local communities and social/political exposures. Availability of specialist plant is often limited and have to be brought in. Longer durations due to sequential works and restricted access. Existing property in the vicinity of project works Higher costs due to logistics, projects have to be self sufficient. Power,

welfare and accommodation, Concrete batching plants, Installation ofcable cars for personnel and equipment.


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5.1 Geotechnical Challenges

Natural causes of landslides include:• groundwater (pore water) pressure change acting to destabilize the

slope• loss or absence of vertical vegetative structure, soil nutrients, and soil

structure (e.g. after a wildfire – a fire in forests lasting for 3–4 days)• erosion of the toe of a slope by rivers or ocean waves• weakening of a slope through saturation by snow melting, glaciers

melting, or heavy rain• erosion of an exposed slope face via natural weather actions• earthquakes adding loads to barely stable slope• earthquake-caused liquefaction destabilizing slopes• volcanic eruptions • non favorable orientation of faults or discontinuities within the soil or rock

mass


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5.1 Geotechnical ChallengesLand Slide Risk Mitigation & Management

• Site investigation and survey of area to establish degree of geotechnical and topographical risks that a project will face.

• Where possible, access routes and works areas should be located/ routed, as far as practicable, to avoid areas of higher risk. Risk avoidance is normally preferable to mitigation actions.

• Areas with weak sub surface layers and potential fluctuations of ground water may pose increased risk.

• Once location and routes are finalized, detailed site investigation should be undertaken.

• Evidence of past slope movements should be established. Evidence can be found in vegetation (larger bushes and trees growing in an irregular pattern over longer periods of time); tension cracking on slopes, and slumping of toes of slopes.

• Physical protection measures can also be implemented; these can include Slope stabilization actions this may comprise of a programme of rock bolting, debris/ fall arrest netting, face protection shotcrete, rock scaling, deflection structures; or set aside of sterile/ run off areas for sections that are known to suffer rock falls or avalanche.


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Logistical Challenges

5.2 Logistical Challenges

High cost to install, operate and maintain

Contacted Managing Director of Heliswiss International

Fascinating discussion on how key the use of Helicopters in deliveringprojects in Mountainous regions. Very efficient method for installationwhether its for temporary works such as crane installation or permanentinstallation.

Most common projects are Ski/Lift systems, Power transmission andMining projects. Also now being extensively used on urban schemes.

Limitations – weather, seasons, lift capabilities, logistics, Insurancecovers required if they have to abandon the load for any reason.


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5.3 Technical Challenges - Logistics


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The lift!5.3 Claims - Logistical challenges

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Value of works increases with time Value of equipment and material varies with time Exposure (and potential loss) is a function of the

project phase Vulnerability is a function of the project phase

Linth Limmern Switzerland


5.4 Technical Challenges - Dynamic Risks

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Underwriting

6.0 Underwriting Considerations


A very key part of the process with - understanding the risk exposureparticularly on the more perceived ‘low key’ elements.

Quality of Risk information – do we always get enough to fullyunderstand the risks

Exposure from locations away from project site

Risks exposures due to duration of works, scope change, costincrease, site issues.

Contract certainty – Type of wording. MRe or Market Reform type

Sub Limits – often very high due type of work and remote locations ofsites.

Difficult to evaluate DSU values – entrepreneurial risk? ViewingGalleries for instance?

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Claims

7.0 Claims and Lessons Learnt

Limited information available with respect to some claims because ofconfidentiality and that some still at a sensitive stage

There were also some other very unique claims. We were made awareof claims involving sabotage, rebel action on projects that had started todemobilize from site and left key items such as power cables in theground. Only when they came to be reenergized did the project realizethat local villagers had cut the cable for salvage costs. Henceremobilization costs were significant when these sort of items occur

The examples that follow are some of the consequences of theexposures in Mountainous regions for Underwriters to consider.


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7.1 Claims – Pipeline Projects

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7.1 Claims – Pipeline Projects

The consequences of this incident • The damage occured at an altitude of 5,000 metre above sea level.

The air was too thin for any helicopters to transport new pipe sectionsto the required locations

• Due to the difficult mountainous terrain and extreme weatherexperienced at such high altitude, The remobilization of Contractorsequipment and machinery to carry out the removal of backfill, cuttingof damaged pipes and re-welding was a muliple of the original projectcost by a factor of 3 to 4 times.

• The need to conduct repeat hydrostatic and other testing requiredsignificant additional costs and time.

• Salvage issues due to high cost of disposal.• Time required to resolve delayed the project by several months

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7.3 Claims – Hydro and Dam Projects Pakistan


• A 130 MW Hydro Power Project in Pakistan encountered 1 in 80 years flooddue to unprecedented rainfalls in the catchment areas in July 2010.

• This flood water breached/ overtopped the cofferdam at the Weir and washed itaway, entered the 5 km long Tunnel under construction, exiting with brute force,resulting in a massive land slide towards the Power house and maincamp/stores located at a lower elevation.

• It caused severe damage to the Insured contract work including plant andmachinery resulting in claim of USD 30 million, 2 years delay due toinaccessibility.

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7.3 Claims – Hydro and Dam Projects Pakistan

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• Selection of wrong location for main camp and stores, directly in therange of outlet of the tunnel and subsequent land slide prone arealead to several fatalities and dumping of several meters of debris,causing loss to equipment and other property

• Munich Re clause 110 for safety precautions not followed to the spirit.• Changes in weather patterns lead to an unprecedented flood of

intensity more than the 80 years recorded history

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7.4 Claims – Hydro and Dam Projects


The Hidroituango dam overthe river Cauca, about175km (110 miles) north ofthe city of Medellín, wasjust months fromcompletion when on 28April a landslide near thesite blocked a tunnel builtto divert the river's flowwhile construction wasgoing on.

5000 people evacuateddownstream

Early stages of theassessment. Full impactwon’t be known for quite awhile.

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Claims

7.5 Claims and Lessons Learnt

Remobilization costs were significant when these sort of items occur

Re work costs always in excess of the original project installation costs

Higher Sub Limits can give rise to some additional costs to Physicaldamage values and become fairly extensive claims

Wording leakages and broad cover

Time for Loss adjusters to visit the project if very remote location – maynot be able to after snow has gone for instance.

Definition of Event and occurrence also very key in the Loss adjustingprocess.


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Conclusion

8.0 Conclusions

Projects in mountainous regions require experienced personnel tomanage and successfully deliver them. They also take longer to deliverand can be more sequential with multiple work fronts.

‘Access is Success’ – Setting the standard from the outset and investingin the right solutions to facilitate the project are absolutely key.

The Nat Cat and technical exposures can never be underestimated. Theweather can play a major part. It may mean the works are restricted forpotentially up to 6 months.

Underwriters need to have a clear understanding of the project scope –refer to outline checklist/guide for what should be supplied.

Complex Exposures - When it goes wrong it can have devastatingconsequences – no doubt the new working group on UndergroundProjects will tell us more in 2019 after the events in Columbia and Laos.


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Thank you for your attention.Welcome any questions that you may have ?

Documents

IMIA Working Group Paper 106(18) Construction in ......IMIA Working Paper 106(18) - Construction in Mountainous Regions • A 130 MW Hydro Power Project in Pakistan encountered 1 in