Australian Sugar Milling Council Conference Industry Working Group 21 March 2017
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+. Claim Solutions Over $75m claims settled or in progress. • Technical support for major Aon delivers tailored solutions. claims. • Risk accounting services. • Early acceptance of indemnity • Quick progress payments Policy Coverage Emerging Risks • • Industry specific wordings. Weather risks. Supply Chain • • Proven claim response. Grower pricing. Risks • • Access to global markets. Cyber. • • Supported by loss modelling. Co-generation / diversification. • Occupational Heath & Safety. Risk Consulting Risk Engineering Aon Sugar • Risk Profiling. • Bi-annual risk inspections • Risk Tolerance. Industry • Asset benchmarking. • Valuations. • Management of risk • Business interruption reviews. Clients recommendations. 2 Aon Risk Solutions) | Global Corporate
Boiler Claims Current Situation – 2 Years – 5 @ $35m - $40m – 7 Years – 7 @ $42m - $47m Note – above figures exclude Wilmar and Bundaberg Sugar. – 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. 3 Aon Risk Solutions) | Global Corporate
Boilers – Impact on Insurance Program Maximum Foreseeable Loss (MFL) Drives: • Machinery breakdown limit; • Business interruption limit; • Indemnity period. Risk Engineering Policy Conditions Boilers • Insurer tool to understand exposure; • Drives: Heart of Mill • Partnership approach – Mill / Aon / • • Coverage level available; Heart of risk exposure Insurer; • Deductible level; • Loss prevention objective. • Premium level. Claims • Generally large losses; • Increasing frequency; • Need to understand cause. 4 Aon Risk Solutions) | Global Corporate
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 5 Aon Risk Solutions) | Global Corporate
Formation of Boiler Working Group 1 Formed August 2016 • Engineers from each milling group. 100% Industry Participation • Monthly phone calls. – • Quarterly face to All members of Aon Sugar Group. face. – Wilmar Sugar (40% of industry). • Dedicated sessions at – Aon Conference. 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. – 2 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. Aon Risk Solutions 6 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? Aon Risk Solutions 7 Aon Sugar Group – General Purchasing Group Overview
Boiler Working Group Aon Risk Solutions 8 Aon Sugar Group – General Purchasing Group Overview
Boiler Working Group Aon Risk Solutions 9 Aon Sugar Group – General Purchasing Group Overview
Boiler Working Group Aon Risk Solutions 10 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. Aon Risk Solutions 11 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. Aon Risk Solutions 12 Aon Sugar Group – General Purchasing Group Overview
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