Australian Sugar Milling Council Conference Industry Working Group - - PowerPoint PPT Presentation

Australian Sugar Milling Council Conference Industry Working Group

21 March 2017

Aon Risk Solutions) | Global Corporate

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Aon’s Relationship with the Sugar Industry

• Broker to approximately 95% of Australian sugar milling industry.
• Over $11b of assets placed into insurance market.
• Some relationships 40 years+.
• Over $75m claims settled or in progress.
• Aon delivers tailored solutions.

Aon Sugar Industry Clients

Risk Engineering

• Bi-annual risk inspections
• Asset benchmarking.
• Management of risk

recommendations.

Policy Coverage

• Industry specific wordings.
• Proven claim response.
• Access to global markets.
• Supported by loss modelling.

Claim Solutions

• Technical support for major

claims.

• Risk accounting services.
• Early acceptance of indemnity
• Quick progress payments

Emerging Risks

• Weather risks.

Supply Chain

• Grower pricing.

Risks

• Cyber.
• Co-generation / diversification.
• Occupational Heath & Safety.

Risk Consulting

• Risk Profiling.
• Risk Tolerance.
• Valuations.
• Business interruption reviews.

Aon Risk Solutions) | Global Corporate

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Boiler Claims

• Current Situation

– 2 Years – 5 @ $35m - $40m – 7 Years – 7 @ $42m - $47m – Increasing frequency and severity; – Is there a trend?

• Past arguments:

– One-off events; – Not related to risk engineering / operational practices; – Will return to previous benign claim trends.

• Moving forward:

– Insurers will not accept past arguments; – Need to demonstrate why / how claim frequency & severity will reduce.

Note – above figures exclude Wilmar and Bundaberg Sugar.

Aon Risk Solutions) | Global Corporate

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Boilers – Impact on Insurance Program

Maximum Foreseeable Loss (MFL)

Drives:

• Machinery breakdown limit;
• Business interruption limit;
• Indemnity period.

Policy Conditions

Drives:

• Coverage level available;
• Deductible level;
• Premium level.

Claims

• Generally large losses;
• Increasing frequency;
• Need to understand cause.

Risk Engineering

• Insurer tool to understand exposure;
• Partnership approach – Mill / Aon /

Insurer;

• Loss prevention objective.

Boilers

• Heart of Mill
• Heart of risk exposure

Aon Risk Solutions) | Global Corporate

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Formation of the Boiler Working Group (BWG)

Risk Engineering

Share information & experiences Consider industry best practice Share different perspectives

• Industry
• Insurers
• Independent experts

Consider opportunities to demonstrate an industry risk engineering approach Opportunities to learn & improve processes – based on peer experiences

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Aon Risk Solutions Aon Sugar Group – General Purchasing Group Overview

• Formed August 2016
• 100% Industry Participation

– All members of Aon Sugar Group. – Wilmar Sugar (40% of industry). – Bundaberg Sugar (5% of industry). – Aon (Management role). – Insurers (Vero & CGU). – Buy-in from industry peak body – Australian Sugar Milling Council.

• Agreed Objectives

– Review circumstances of losses. – Consider multiple data sources - individual, industry, engineering, non-engineering. – Review procedures associated with losses. – Share procedures and identify best practice approach. – Identify opportunity for operational improvement – on an individual and industry basis. – Determine if there is a common trend in losses experienced. – Set agenda for discussion at Aon Conference.

• Initial focus topics

– Start-up procedures. – Water level controls.

Formation of Boiler Working Group

• Engineers from each

milling group.

• Monthly phone calls.
• Quarterly face to

face.

• Dedicated sessions at

Aon Conference. 1 2

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Aon Risk Solutions Aon Sugar Group – General Purchasing Group Overview

Boiler Working Group

• Progress was made during the phone conferences, however this did prove to be a difficult forum.
• The majority of progress was made during the conference.
• We understood that there were a lot of experts in the group.
• Our main aim was to form a consensus on what good practice looked like, and,
• What should be a minimum standard industry practice?

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Aon Risk Solutions Aon Sugar Group – General Purchasing Group Overview

Boiler Working Group

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Aon Risk Solutions Aon Sugar Group – General Purchasing Group Overview

Boiler Working Group

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Aon Risk Solutions Aon Sugar Group – General Purchasing Group Overview

Boiler Working Group

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Aon Risk Solutions Aon Sugar Group – General Purchasing Group Overview

Boiler Working Group

Absolute Requirements for Boiler Operation

• Boiler drums must be equipped with High and Low Water level Alarm. The low-low water alarms will

automatically lockout the boiler’s energy input. These alarms must be of an industry proven high integrity type.

• An open flame shall be present before a liquid or gaseous combustible fuel is added to spread flame around

the boiler grate.

• The boiler’s furnace shall be purged of all volatile gases prior to any ignition source being introduced to the

furnace. – Purging shall be via extraction (ID Fan) and consist of a minimum of five calculated furnace air volume changes (unless a measured airflow of greater than 25% MCR has been maintained between start attempts).

• There shall be no fuel left on the grate during banking. If combustion using solid fuel is lost (i.e. no visible

flame) all fuel is to be locked out and the furnace content **removed from the boiler’s grate(s). No fuel is to be reintroduced until purging is complete and a new flame established. **Removal of fuel:

• If fuel is removed through running out of the product, all combustion air should be shut-off to help smother

combustion;

• If fuel is to burnt off the grate airflow should be maintained to prevent the build-up of volatile vapours.

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Aon Risk Solutions Aon Sugar Group – General Purchasing Group Overview

Boiler Working Group – the future

• There is a good consensus in the group that this exercise was useful, and there is an intention to continue.
• This opinion is shared by ourselves and the insurers.
• There are a number of topics that could be tackled next – including the one which was parked initially (Safety

system controls; i.e. water level controls / combustion controls).

• It is envisaged that the discussion group will evolve beyond boiler issues.
• The take-up of the agreed ‘absolutes’ will be good to see, and should be reviewed. This will be reviewed as

part of the Risk Engineering Surveys.

• The ASMC has expressed interest in taking on the stewardship of this group.