12-0268 Nat Cat Pack Full v5

The NAT CAT Pack
Contents
The NAT CAT Pack: our guide to best practice in relation to
natural catastrophe risk management and transfer
Natural catastrophe Risk Management
Nat Cat Risk Map
Natural hazards and catastrophe modelling
- Supply chain risk management

-
After the earthquake: Supply chain resiliency
- Business continuity management

- Business Interruption Insurance Reviews
- Marsh Disaster Recovery Portal
- Guy Carpenter CAT Central
- Bowring Marsh: Global Property
- Lessons Learned from the Catastrophes of 2011
- Insurance claims preparation
- Sustainability the changing climate of risk
-
Property Sustainability Green Buildings
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Natural catastrophe risk management
Background
NAT CAT Pack
With natural catastrophe (NAT CAT) events increasing in

frequency and severity, and insurers scrutinising
exposures more than ever, the necessity for proactive
risk management and swift post-loss support is clear.
The NAT CAT Pack is our guide to best practice in risk

management and transfer of natural catastrophe
exposures. The NAT CAT Pack includes the following:
The increasing complexity of risks, combined with the

desire for greater transparency from markets and
supervisory authorities, is placing ever greater demands
upon organisations to provide easy access to accurate
property exposure information.
Up-to-date and detailed NAT CAT information is of
paramount importance, allowing for an informed
decision-making process in relation to loss prevention
and resilience, loss mitigation, and risk transfer for direct
NAT CAT risks, but also for indirect risks such as
exposures of key customers or suppliers.
Regular checks, for example, on the risk of natural
hazards and the adequacy of NAT CAT limits, are
essential for efficient and adequate resource allocation,
and risk financing decisions.
* A PEA provides the zoning information and maximum limits to highlight

locations that require further review; the next step is more detailed modelling
that looks at the likelihood of events and specific loss estimates for identified
hot spots, which provides a more accurate picture.
NAT CAT Risk Map This is an interactive map of your

complete portfolio of assets, including suppliers locations
where appropriate. From a single view you can see all your
property risk data, and now this includes NAT CAT hazard
exposures. In collaboration with CS Stars and using
NATHAN (Munich Re GeoSpatial Solutions natural
hazards risks database), we can offer NAT CAT exposure
information using a unique licensing agreement.
The NAT CAT Risk Map includes natural hazard data for
all your locations, and suppliers on request, through the
Risk Goggles view in Stars Enterprise. This can include a
portfolio exposure assessment report and workshop, as
described below. This initial step is essential for full
portfolio view, helping to identify hot spots requiring
further consideration.
NAT CAT exposure assessment A Portfolio Exposure
Assessment (PEA)* assesses the exposures of your
portfolio and accumulation of risks. The assessment
consists of the reporting of your portfolio on NAT CAT
exposures and accumulation analyses in relation to the
Cresta Zones in which your sites are located using
NATHAN. The portfolio assessment allows for analyses of
natural hazards at up to 5,000 locations worldwide with
the position of each individual risk identified at the
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maximum level of detail. This can include your own

locations and that of suppliers, and can be extended to a
full vulnerability and loss prevention assessment,
providing information required for risk management,
transfer, and NAT CAT modelling.
NAT CAT modelling Once the hot spots have been
identified through the NAT CAT Risk Map and/or exposure
assessment, detailed modelling is the next step. Marsh has
a team of global practitioners specialising in state-of-theart computer modelling techniques to analyse property
risks for multiple natural hazard perils in terms of
probability of occurrence. This draws upon a worldwide
database of historical and probabilistic information
relating to earthquakes, hurricanes, tornados, and hail.
Knowing the 250-year or 500-year loss level and the
average annual loss (AAL), combined with the exposure
assessment and COPE data, will give you superior
knowledge of your risks, strengthening your position in
the insurance marketplace.
NAT CAT event scenario workshops Bringing together
experts from all relevant areas of risk (property, business
interruption, environmental, liability), we offer scenario
workshops that identify the worst loss NAT CAT scenario
and the risk and insurance implications arising from the
event. We can then identify risk transfer gaps, areas that
require additional analysis, and potential solutions. For
example, in relation to your business interruption
exposures, we can quantify your potential losses both
the maximum loss and the mitigated loss. We can also
offer specialist business continuity management advice,
specific testing of your business continuity plans, and an
audit for business interruption insurance purposes.
2 Natural Catastrophe Risk Management
Environmental impairment study As a separate project

or an extension of the above, our Environmental Practice will
undertake a specialist analysis of the potential likelihood
and significance of pollution and environmental damage
incidents that may occur as a result of a NAT CAT event.
Assessing possible environmental loss scenarios as they
relate to regulatory and third party liabilities for pollution or
environmental damage alongside the insurance coverage
for environmental liabilities provides valuable information
about the potential gaps in insurance coverage and
highlights how environmental impairment liability insurance
may address these gaps.
Guy Carpenter Cat Central CAT-i bulletins Guy
Carpenters GC Analytics unit produces CAT-i bulletins that
provide regular updates on events likely to incur significant
industry losses. CAT-i bulletins cover major natural
catastrophes worldwide, including major UK and European
floods, worldwide tropical cyclones, and earthquakes.
NAT CAT placement This includes not only your local
Marsh placement team but also the specialist international
placement services of Bowring Marsh. We can also offer
parametric loss products that do not need damage to have
occurred, but instead have weather-related loss triggers,
for example, WindX-SITM, Ace Storm Tracker & Spectra,
and Capital Markets Parametric.
We also encourage insureds and insurers to adopt
property sustainability principles in relation to property
policies for example, green building and resilient
repairs clauses. If reinstatement is required after an
event, why not do it in an environmentally friendly and
more robust way?
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Claims If you suffer loss as a result of a NAT CAT event,

we will help you through the insurance claim process and
offer support and guidance at the time you need us most.
From updates provided by Marshs Disaster Recovery
Portal, to claims representation and preparation,
including a Catastrophe Response Plan (CAT Plan), this
global service provides assistance with pre-loss advice
and post-loss assistance. Our international specialist
claims professionals, including the Forensic Accounting
and Claims Services (FACS) team, will ensure the burden
of the insurance claim is minimised, leaving you to focus
on the recovery of business.
UNISDR Making Cities Resilient We are a partner of
the United Nations International Strategy for Disaster
Reduction (UNISDR) and support its Resilient Cities
campaign. Working with mayors and governments, we
assist UNISDR in making cities, buildings, public spaces,
and infrastructure more resilient to natural hazards.
How you CAN benefit

The proactive risk advice we can offer will give you deeper
insights of NAT CAT exposures around the world (for your
business, your suppliers, and your customers), creating
opportunities to further improve risk management. By
exploring business continuity management needs,
business interruption insurance options, and quantifying
potential NAT CAT losses, you can make informed risk
management and transfer decisions.
The availability of catastrophe data puts you and your
Marsh broker in a stronger negotiating position and
provides essential information on your exposures. The
transparent and consistent data can allow for more
competitive and more accurate NAT CAT insurance rates,
potentially lower deductibles, and wider coverage options.
insurers to better manage their capital, allowing for more

attractive rates for your insurance cover.
Who should buy these services?

Those with significant NAT CAT premium spend, claims
history, or exposure (including supply chain risks), would
benefit from these services. Those affected by NAT CAT
events, both directly and indirectly, will be able to choose
the appropriate items from the NAT CAT Pack.
Potential users for the NAT CAT Risk Map and portfolio
exposure assessment (our initial step in our best practice
guide) will be:
Those with a large portfolio of small and mid-size sites,
such as real estate clients and smaller network sites of
telecommunications.
Companies with a number of service centres in which
each individual site would not exceed a given NAT CAT
limit (the accumulation of sites in a certain risk area
might).
Those involved with mergers and acquisitions as part
of due diligence.
Those with high NAT CAT rates or who have difficulties
placing NAT CAT.
Companies with complex supply chains that would like
further information on the risks associated with their
suppliers locations.
Any business with a large portfolio of locations for
which placement would include NAT CAT cover.
Once the worst-case catastrophe exposure is

determined, you can make informed decisions on the
necessity of more detailed studies for the most heavily
exposed parts of the portfolio. Marsh can help to design
a financial and/or technical mitigation programme in line
with your business goals and objectives.
With Solvency II implementation there is an increased
need to capture NAT CAT exposure data relative to insurer
capital requirements. This additional information will assist
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Contact
For more information please contact
your local Marsh representative or
contact:
Caroline Woolley
EMEA Property Practice Leader
Marsh
+44 (0) 20 7357 2777
Mobile: +44 (0) 7800 682710
[email protected]
Ron de Bruijn
Marsh Risk Consulting
+31 10 4060394
Mobile: +31 622521255
[email protected]
julie speed
Business Development Coordinator
Risk Practices, Marsh EMEA
+44 (0) 20 7357 2608
[email protected]
The information contained herein is based on sources we believe reliable

and should be understood to be general risk management and insurance
information only. The information is not intended to be taken as advice
with respect to any individual situation and cannot be relied upon as such.
In the United Kingdom, Marsh Ltd. is authorised and regulated by the
Financial Services Authority for insurance mediation activities only.
Copyright 2013 Marsh Ltd All rights reserved
GRAPHICS NO. 11-0126
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NAT CAT Risk Map
Background
With natural catastrophe (NAT CAT) events increasing
in frequency and severity, and insurers scrutinising
exposures more than ever, the necessity for proactive
risk management and swift post-loss support is clear.
This is why we have created the NAT CAT Risk Map.
This is an interactive map of your complete portfolio
of assets, including suppliers locations where
appropriate. From a single view you can see all your
property risk data, and now this includes NAT CAT
hazard exposures.
The increasing complexity of risks, combined with the desire for greater transparency
from markets and supervisory authorities, is placing ever greater demands upon
organisations to provide easy access to accurate property exposure information.
Up-to-date and detailed NAT CAT information is of paramount importance, allowing
for an informed decision-making process in relation to loss prevention and resilience,
loss mitigation, and risk transfer for direct NAT CAT risks, but also for indirect risks
such as exposures of key customers or suppliers.
Regular checks, for example, on the risk of natural hazards and the adequacy of
NAT CAT limits, are essential for efficient and adequate resource allocation, and risk
financing decisions.
NAT CAT Risk

Map Package
Developed in association with Marsh,
this forms part of the NAT CAT Pack,
our guide to best practice in risk
management and transfer of natural
catastrophe exposures. The NAT
CAT Risk Map expands upon the
use of traditional Risk Management
Information Systems (RMIS) by
incorporating a location-based
graphical interface that integrates
location geocoding, external events,
and mapping services with your location
risk data.
The NAT CAT Risk Map package
includes:
NAT CAT Risk Map for Risk Goggles
(including a report of findings)
NAT CAT Risk Map workshop
On-map and email alerting service for
global NAT CAT events
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NAT CAT Risk Map
STARS Enterprise provides complete
visibility into your property portfolio and
exposure values by tracking detailed
construction, occupancy, protection, and
exposure (COPE) information; plus loss
prevention and loss control information
for each property. Related documents
and images can also be attached to create
a complete profile for any asset. Natural
hazard data can now be added into the
Risk Goggles view.
Utilising advanced global geocoding
services and an intuitive user interface,
end-users are able to review and update
the longitude and latitude co-ordinates
created by the system. A collaboration
between Munich Re Geospatial
Solutions and Marsh opens up a new
way of looking at NAT CAT risk. This
lets clients capture natural hazard data
for co-ordinates for assets such as oil
platforms, communication towers, and
rail crossings, or supplier locations that
are not associated with traditional street
addresses.
A report of findings is provided in the
form of a portfolio exposure assessment
(PEA)*. The report identifies your portfolio
of NAT CAT exposures and performs
accumulation analyses in relation to
the CRESTA zones in which your sites
are located. This allows analyses of
natural hazards at up to 5,000 locations
worldwide with the position of each
individual risk identified at the maximum
level of detail.
* PEA provides the zoning information and maximum

limits to highlight locations that require further
review; the next step is more detailed modelling
that looks at the likelihood of events and specific
loss estimates for identified hot spots, which
provides a more accurate picture.
2 Natural Catastrophe Risk Map
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NAT CAT Risk Map Workshop
Bringing together experts from CS STARS and Marsh, we will demonstrate the system
and ensure you understand the data provided. There will be an opportunity to consider
all relevant areas of insured risk (property, business interruption, and environmental
liability), as well as other areas of risk that might currently be out of the scope of cover.
We will help identify the worst NAT CAT loss scenario, and the risk and insurance
implications arising from the event. We can then start to identify risk transfer gaps, areas
that require additional analysis, and potential solutions.
On-Map and Email Alerting

On-map and email alerting is included for over 100 different US weather alerts, tropical
cyclone tracking, and global earthquake events. You decide the events to track and the
data is archived against your locations for future analysis.
On-map alerting helps you quickly recognise areas of critical concern. Monitoring against
your key performance indicators ensures you are visually alerted whenever specific
thresholds are met or when serious events occur.
Emails can automatically alert your management teams in real-time when an event
impacts your location to speed up your response time and improve communication
across your organisation.
In addition, you will be registered with Guy Carpenters GC Analytics unit, which
produces CAT-i bulletins that provide regular updates on events that are likely to incur
significant industry losses. CAT-i bulletins cover major NAT CAT events worldwide,
including major UK and European floods, worldwide tropical cyclones, and earthquakes.
STARS Enterprise
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Further
Options
Please note, this is recommended as
the first step in establishing a best
practice approach to NAT CAT. Further
detailed NAT CAT modelling can be
performed for the hotspots identified in
the NAT CAT Risk Map package. Property
surveys, including vulnerability and
loss assessments, will help manage risk
at each location, while providing the
relevant data for any detailed NAT CAT
modelling assignments.
Marsh has a team of global practitioners
specialising in state-of-the-art computer
modelling techniques to analyse property
risks for multiple natural hazard perils in
terms of probability of occurrence. Marsh
draws upon a worldwide database of
historical and probabilistic information
relating to earthquakes, hurricanes,
tornados and hail. Knowing the 250-year
or 500-year loss level and the average
annual loss (AAL), combined with the
data from the NAT CAT Risk Map, will give
you a superior knowledge of your risks,
and strengthen your risk management
information and your position in the
insurance marketplace.
INTEGRATION
WITH STARS
ENTERPRISE
STARS Enterprise includes over 20
modules. Features that can easily be
added to the NAT CAT Risk Map package
include:
Renewal Data Collection
Property and Facility Audits
Incident Reporting
Claims Management
Claims Benchmarking
The workshop may expose risks or

identify information gaps that require
further consideration, including property
loss prevention, business interruption
values, environmental liability, and supply
chain or business continuity response and
recovery.
These further solutions can be discussed
with your Marsh representative or the
contacts listed here.
CS STARS LLC, a business unit of Marsh, serves the technology needs of

risk managers and claims professionals, delivering integrated software
and services for risk, claims, and compliance management. CS STARS
primary software platform, STARS Enterprise, supports comprehensive
risk management, claims administration, enterprise risk management
(ERM) and compliance and safety management.
Copyright 2013 Marsh Ltd. All rights reserved.
Contacts
Caroline Woolley
[email protected]
+44 20 7357 2777
Mark Holt
CS STARS Business Development
Continental Europe
[email protected]
+44 20 7357 3674
Ron de Bruijn
EMEA Practice Leader, Property
Risk Consulting & Work Force
Strategies Practice
[email protected]
+3 1 10 406 0394
Julie Speed
Business Development Coordinator
EMEA Risk Practices
[email protected]
+44 20 7357 2608
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Natural hazards and

catastrophe modelling
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What are natural

hazards?
A natural hazard is an unexpected
and uncontrollable natural
environmental phenomenon of
unusual magnitude, which can
result in widespread destruction of
property and lead to injury or
death.
Why do they matter?
At least one type of natural hazard affects every
location on earth. A natural event is recorded as a
natural catastrophe when damage to property,
number of deaths or injuries or serious
environmental damage reaches certain
predefined criteria. Organisations have also seen
an upward trend in losses from natural
catastrophes emerge over the past few years see Fig 1.
Natural catastrophes have the ability to cause
vast and unexpected damage. History has shown
how a single windstorm, earthquake or flood can
destroy property, interrupt business and cause
severe and immediate impact on any companys
bottom line.
Natural hazards pose considerable challenges for
businesses that are committed to reducing their
exposure to physical damage and business
interruption.
The risk posed to a company by natural hazards

will depend on:
Hazard the frequency and severity of events
in a given geographical area
Vulnerability the extent of damage to
property at a given event intensity
Exposure the exact location and value of
property
Risk financing what proportion of the loss is
retained by the company and what insurance or
other risk financing mechanisms are in place.
Companies seeking to protect their business from
the risk of natural hazards should re-evaluate the
level and amount of information they collect about
their exposures, what measures they are taking to
mitigate the consequences of catastrophic events
and what insurance protection they have in place.
The Marsh RISK CONSULTING

solution
Marsh Risk Consultings risk management
solution to natural catastrophes focuses on:
identifying the hazard in terms of its geographical
distribution and potential intensity and
frequency, in relation to the locations at risk.
quantifying the potential financial exposure in
order to help clients design optimal insurance
and risk financing solutions
managing the risk through enhanced risk
mitigation strategies.
Marsh Risk Consulting 1
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Fig 1.
Great Natural Catastrophes Worldwide

1980 - 2011
300
250
(US$ bn)
200
150
100
50
1980
1985
1990
1995
2000
Overall losses (in 2011 values)
Trend overall losses
Insured losses (in 2011 values)
Trend insured losses
Source: 2012 Mnchener Rckversicherungs-Gesellschaft, Geo Risks Research, NatCatSERVICE - As at January 2012
2 Natural Hazards and Catastrophe Modelling
2005
2010
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Phase 1
Phase 2
Identification
Quantification
Understanding the magnitude of your natural hazards

exposures is vital. Facilities located in harms way must be
identified. Damage to your companys physical assets will
interrupt operations and the ability to do business.
Knowing an exposure exists and potential risks it presents

to your organisation is a beginning. In order to quantify the
risk, design optimal risk fanancing and priority mitigation
efforts potential loss levels must be developed.
The preliminary examination of your property schedule

can determine:
Scientifically sound loss expectancies can be developed.

Marsh Risk Consulting uses state-of-the art computer
modelling to analyse physical damage and property
business interruption risks for all types of natural hazard
perils.
proximity to earthquake faults;

distance to the coast;
flood exposure; and
windstorms and storm-surge potential.
Using historical event records, geological and
environmental data, our specialists assess the number,
intensity and frequency of natural hazards. By analysing
the combined hazard and vulnerability information, they
estimate the maximum potential losses in property, stocks,
equipment, supplies and revenue.
Often a detailed evaluation of site(s) most at risk is necessary
to better understand the business interruption profile.
Data from the evaluation helps to identify the relationship
between physical assets and critical operational components
and to identify site specific risk. Clients can then used this data
to develop a cost benefit study of risk improvement options.
This phase is undertaken through:
Implementing a site inspection and analysis to gather
detailed site-specific information as well as location data
and business information.
Applying Marsh Risk Consultings assessment skills and
expertise to identify vulnerable areas of buildings,
structures and equipment. Several potential
improvement options can be identified for each area.
The development of a detailed cost-benefit analysis based
on the cost of each option and the expected reduction in
probable maximum loss and business interruption.
The model draws upon a worldwide database consisting of

both historical and scenario-derived information. Potential
losses are established by running historical events against
the current exposures of our clients. A large number of
random events are also run and the losses assessed from
each. Taking into account the annual probability of each
event, levels of losses are derived that can be exceeded
with different levels of probabilities.
The statistical process, through the simulation of thousands
of random events, produces loss estimates. The input data
can range from very broad information, including general
location and building occupancy, to the highly specific,
including detailed construction characteristics.
Phase 3
Management
Once you determine the expected loss levels, responsible
management programmes and recommendations on the
mitigation strategy can be developed. The options are
extensive and may include:
Advice on transfer, retention level and supply chain
adjustments
Assistance on corporate and site preparedness
programme upgrades and critical process equipment or
material relocation
Quality checks to ensure that the agreed mitigation
procedures and measures are in place
Advice on reducing natural catastrophe exposure in the
most cost effective way
Recommendations for further cost effective natural
hazards loss control mitigation procedures.
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World map of natural hazards
4 Natural Hazards and Catastrophe Modelling
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Case study
Our client needed to assess their aircraft hull exposure to hurricane for airports in Texas and Florida in order to
ensure that adequate insurance was in place and monitor risk accumulation. Marsh Risk Consulting conducted a
fully probabilistic hurricane modelling, using state of the art modelling data, in conjunction with statistical
modelling of hull losses to quantify exposures to different return-period events. After the project was completed,
the client was in a better position to understand potential losses to hurricane exposure, validate appropriateness
of insurance limits and identify airports where the level of risk accumulation had breached their risk tolerance
levels.
Working with Marsh

Marsh is a recognised leader in providing both traditional and innovative solutions to clients risk
retention levels, insurance programme design and risk financing strategies. We have a global natural
hazard team of experienced professionals that can help clients to identify, quantify and manage
natural hazard risks to help them better prepare for extreme adverse natural catastrophes.
The information contained herein is based on sources we believe

reliable and should be understood to be general risk management
and insurance information only. The information is not
intended to be taken as advice with respect to any
individual situation and cannot be relied upon as such.
Marsh Ltd. is authorised and regulated by the
Financial Services Authority for insurance
mediation activities only.
Copyright 2013 Marsh Ltd
All rights reserved
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Supply chain risk management

and risk transfer
In todays global business environment,

supply chains are becoming increasingly
complex and the dependence being
placed on them is unprecedented.
Many organisations are under enormous pressure to reduce costs
in their supply chain and improve efficiency, whilst also finding
ways to improve customer service and responsiveness. Reducing
costs can often result in the unintentional increased exposure to
risks of disruption, and companies must understand and manage
the complex web of risks that arise. A Marsh risk survey1 identified
that although 94% of organisations agreed that supply chain is
important, only 58% have evaluated the risk exposures derived
from the supply chain. The consequences of an interruption in the
supply chain can be severe, as demonstrated by the increased
severity and frequency of natural catastrophes, including not just
loss of revenue and decreased profitability, but a reduction in share
price, and in extreme cases, permanent damage to reputation and
brand. A survey2 indentified natural hazard exposure as the top risk
in the supply chain. Marsh has therefore developed innovative
solutions to these supply chain issues, including both a rigorous
assessment service and a risk transfer product.
Although property damage/business interruption policies can
cover interruption to a supply caused by physical damage at a
suppliers premises (often limited to first tier suppliers), they do not
cover the non-damage interruptions that are so often experienced,
such as strikes, political risk incidents and port disruptions. Another
example is the eruption of the Eyjafjallajkull volcano in Iceland
that caused significant interruption to air transport. There was little
or no damage in most cases, but the disruption was significant.
Marsh has worked with leading insurers to develop insurance
products to meet this client need and fill this gap in the market.
1
2
Facing an Uncertain Future, 109 UK firms polled in 2009

Business Continuity Institute Survey (BCI) 2010
Marsh Risk Consulting offers an assessment service that, as a

minimum, will provide all the qualitative and quantitative
information needed to obtain a quote for this policy. However, it is
recognised that the effective management of supply chains requires
a more detailed approach, encompassing risk, operational and
financial considerations. Marsh works with these separate business
functions to find the best solutions for the business as a whole. The
assessment provides sufficient data to enable informed decisions
in relation to risk transfer, but also in relation to improvements and
the allocation of resource. The assessment service includes:
risk identification;
risk measurement;
risk improvement; and
risk treatment.
Risk identification
Marshs Supply Chain Risk Management (SCRM) Practice
undertakes a comprehensive review of supply chain exposures. This
begins with the mapping of the internal and external supply chain
(including services) and continues with consideration of the key
operational processes or services and potentially critical failure
points. We can also include a natural hazard risk map of suppliers
using our exclusive broker access to a natural hazard zone database.
Risk measurement
Many businesses can name the suppliers that represent the
biggest threat, but the actual financial impact is rarely
quantified. Using a variety of tools including impact modelling,
forensic accounting and gap analysis, the potential loss of
gross profit is established. This is shown in terms of the
maximum exposure and, more importantly, the mitigated loss.
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Risk improvements
Once the critical operations and suppliers
have been established and the exposures
quantified, appropriate risk management
strategies can be developed in order to
achieve an adaptive and resilient supply
chain. Using Marsh Risk Consultings
expertise in business continuity, existing
mitigating controls are benchmarked
against best practice and a suitable plan can
be established. Our experts balance
efficiency with fragility, helping to achieve
savings while minimising the risks involved.
Risk treatment
Insurance underwriters use the risk analysis
to make qualified decisions about a clients
exposures and will set the rate accordingly.
The programme design is customised to the
needs of the business and the level of cover
required. The risk improvements identified
in the assessment process (once
implemented) will ultimately help reduce
the cost of the insurance.
The assessment
process
Workshops and stakeholder interviews
to determine key exposures and gather
sufficient qualitative and quantitative
data for the insurance application.
Access to Marsh experts including
business continuity consultants, the
property risk practice, modelling and
business analytic professionals, and
forensic accountants.
The use of models to map the risks,
benchmarking tools to compare existing
solutions to best practice, and financial
analysis in the quantification of loss.
Presentation of findings in a report that
will enable the business to make
informed risk management and risk
transfer decisions.
Insurance product
features
The product reacts to an insured event that
is not limited to physical loss or damage.
Types of covered events can include
pandemic, strike, political risk or insolvency,
therefore stretching way beyond existing
products available in the market.
Coverage is defined as disruption or delay in
the receipt of named products, components
or services from a named supplier.
The loss of gross profit/earnings is
measured during the assessment process
and used to determine a fixed claim
amount per working period.
The pre-determined fixed claim amount
provides certainty of recovery levels and a
more streamlined claim process.
Extra expenses over and above normal
operating costs incurred by the insured
for loss mitigation can be included.
CONTACTS
Caroline Woolley
[email protected]
Tel: +44 20 7357 2777
Markus Groth
[email protected]
Tel: +49 40 3769 2264
Rod Ratsma
[email protected]
Tel: +44 1908 846012
Julie Speed
Business Development Coordinator,
EMEA Risk Practices
Marsh
[email protected]
Tel: +44 20 7357 2608
The process is continuous, therefore a

monitoring and control system can be
devised to ensure improvements are
embedded, while remaining flexible to
the dynamic nature of supply chain risk.

Key benefits
Innovative product offering to meet
a gap in the market insurance
policy to cover non-damage
business interruption risks arising
from your supply chain
Marsh can provide the full
spectrum of services from
identification of key risk
exposures in the supply chain,
through to risk treatment
solutions including risk transfer
The development of a risk
management plan providing
options to reduce the potential
exposure to your business, and
provide information to assist in
business and operational decisions
Encourage business alignment
through executing a risk strategy
in collaboration with key
suppliers; Marsh can offer
ongoing analysis and assessment
if required
The assessment includes
quantification of loss for key
suppliers to: identify the financial
impact on the business; provide
vital information required for
financial decisions; assist in the
allocation of resource; and give
insurers a basis for establishing
an insurance quotation.
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After the earthquake:

Supply chain resiliency
At 14:46 (JST) on 11 March 2011 the worst earthquake in the history of Japan struck
Japans north-eastern coast. It reached a magnitude of 9.0 on Richter Scale and its
epicentre depth was 24km. Following the earthquake, a tsunami battered, not just
the coast, but it penetrated inland up to 10km with a depth of 25m in places.
The area was then, literally, faced with meltdown as Fukushima Daiichi Nuclear
power plant reached a Level 7 crisis rating (the same as Chernobyl).
There was devastation and loss in all regards, but
particularly in relation to property and life. The death-toll
was estimated at 15,188, with 8,742 missing and
5,337 injured.1 Evacuees totalled 108,672.
The Japanese Government estimates damages caused
directly by the earthquake/tsunami mount up to
between US$197bn and US$307bn. The direct damage
to the Japanese economy is already clear, the IMF made a
downward revision of Japans economic growth in 2011
from 1.6% to 1.4%, and there are already
102 earthquake-related bankruptcies. Ibaraki, Iwate,
Miyagi, Fukushima the worst stricken areas together
account for 6.5% of GDP. Japans GDP was U$5,300bn
in 2010.2
Our claims teams are working with clients in relation to
their direct losses as a result of the event, offering
support and claims preparation. However, it is the
indirect consequences in the supply chain that are being
felt in the rest of the world. Japan accounts for around
20% of global production of semi-conductors, 60% of
silicon wafers and 90% of bismaleimide-triazine, or
BT resin. For automobile manufacturers, supplies of
around 230, out of the roughly 3,000 parts required to
make the average car, are either running short or out of
supply. It is the indirect losses that are the focus here.3
Risk management
Competitive organisations have shortened their supply
chains by removing excess inventory or capacity,
pushing non-core services to lower cost providers,
shedding/consolidating physical assets, and reducing
third party providers or suppliers. The conflict between
efficiency and risk is apparent, and business continuity
and loss mitigation must be a top priority as all this
results in greater sourcing risk. The focus must be on risk
management, and informed risk transfer decisions can
then be made. Preparation is key, including analysis of
single points of failure (SPOFs) with these risks being:
quantified start with the generation of revenue,
calculate gross profit and potential increased costs;
prioritised based on quantitative and qualitative
information, and consideration of interdependencies.
It is then possible to determine the level of investment
needed to manage the risk at a very detailed level,
including consideration of risk transfer.
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Risk transfer
Traditional cover
Once you have a clear picture of risks and exposures
throughout the various tiers in the supply chain, risk
transfer can be considered. There are multiple insurance
implications in relation to Japan. In relation to traditional
property damage and business interruption policies, the
key value chain extension clauses include:
Suppliers extensions: this covers your own loss of
profit/increased costs caused by insured damage.
Key suppliers can be named (specified), and there is
an option for unspecified cover (limited capacity).
Cover is often restricted to first tier suppliers only, and
a separate limit usually applies. There are sometimes
fewer insured perils.
Customers extensions: as above, this covers
interruption caused by insured damage at customers
premises. The main customers are named (specified),
and unspecified cover may be available.
Alternative solutions
With the changing business structures (supplier reliance
and complex supply chains) and changing risk events
(non-damage events such as strikes, ash cloud, cyber
crime) traditional property damage policies are no
longer sufficient.
Whilst we should concentrate on the effect on
businesses, rather than necessarily the cause, we need
to review the interaction of policies and consider the
current gaps in cover. Previously there has been little or
no cover available for non-damage related events.
Some examples are provided above of non-damage
events, but there are also aspects of damage related
events that might not be covered under traditional
policies such as loss of attraction and the rolling
blackouts imposed in Japan.
There are bespoke solutions available: we have worked
with Lloyds syndicates and reinsurers in this regard.
However, for the last two years we have worked with two
key insurers in the development of specific supply chain
solutions for non damage events.
The main features of the cover are as follows:

cover for loss of profit/increased costs of an
interruption to own production/operations as a result
of an interruption in your supply chain;
includes cover for damage and non-damage
interruptions (strikes, ash cloud, rolling blackouts,
restricted access);
there are limited exclusions, the aim is for wider cover;
the interruption is to a named supply and supplier
(product or service);
the cause can be anywhere in the chain, it is not
restricted to the first tier;
there is a pre-agreed amount (e.g. daily rate), thereby
simplifying and speeding up the claims process.
For more information on how we can help

you with managing your supply chain risk,
in terms of the assessment process or the
risk transfer piece, please contact:
Caroline Woolley
Marsh
+44 (0)20 7357 2777
[email protected]
Markus Groth
+49 40 3769 2264
[email protected]
Rod Ratsma
UK Leader of Business Continuity Management
+44 (0)1908 846012
[email protected]
Footnotes:
1 The National Police Agency (Japan)
2 International Monetary Fund
3 The Economist Intelligence Unit, 4 April 2011, Japan business:
Ripple effects
The Wall Street Journal online, 17 May 2011, Construction,
Manufacturing Fall
The information contained herein is based on sources we believe reliable and should be understood to be general risk
management and insurance information only. The information is not intended to be taken as advice with respect to any
individual situation and cannot be relied upon as such.
Marsh Ltd. is authorised and regulated by the Financial Services Authority for insurance mediation activities only.
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Business continuity
management
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HOME
The world is a riskier place. Emerging threats such as
product recalls, with the increasing vulnerability of
sophisticated global supply chains and unpredictable
natural catastrophies, mean that the threat of business
interruption is as great as it has ever been.
It is not just physical assets and staff that are at risk. Customer confidence, brand
and reputation are all susceptible to badly managed incidents or events. Lost
market share is almost impossible to recapture.
In many markets, failure is not an option. The investment community expects
companies to be well governed and competent in managing periods of volatility.
Insurers increasingly require evidence of effective risk management before
providing insurance cover. Market leaders expect the companies that supply
them with products and services to guarantee continuity of supply.
All risks are interconnected and businesses cannot prevent certain threats from
materialising. However, businesses can assess exposure to the risks that they
know about. The need for business to address the effects rather than the
unpredictable and often uncontrollable causes of risk is greater than ever.
Faced with a range of these unexpected and unpredictable risks, all businesses
need to prepare for the consequences. That means building resiliency into your
organisation and its supply chain as well as developing robust business
continuity and crisis management plans.
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BCM advice from Marsh Risk

Consulting
Business continuity management
(BCM) is all about creating
assurances, so it helps when you
can depend on your advisers to
provide assurances of their own.
When your organisation works
with Marsh Risk Consulting to
develop your business continuity
management programme, you
can be sure of solutions that
prepare you for the unknown,
while at the same time are fit for
purpose for your organisation, its
needs, and the sophistication of
its current plans and programmes.
At Marsh Risk Consulting, we are in the business
of risk. We have in depth knowledge of industry
sectors and the problems that each faces.
We understand how threats to business are
changing and the pressures that this creates for
2 Business continuity management
companies to refine and improve the quality of

their BCM. However, we recognise that every
organisation is unique in the way that it
conducts its business. We take time to
understand each clients aims and objectives
and the context in which business continuity
needs to be established. Few organisations have
done nothing, so we also make sure that we
understand what BCM work has already been
done. A key characteristic of our advice is
therefore assisting our clients in defining the
level of preparedness that they require in
different parts of their businesses for their own
unique risk profile.
This approach means that we work with a full
spectrum of clients, from single site
manufacturers developing BCM for the first time,
through companies with existing BCM looking to
review and exercise plans, to large and
sophisticated multinationals seeking to optimise
their investment in BCM and develop a corporate
response to both strategic and operational
threats. Whoever our clients are and whatever
their aims, our goal remains the same to raise
the bar of their business continuity management.
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At Marsh Risk Consulting, we think about our

clients businesses according to their strategic
objectives and the critical processes that underpin
these, and concentrate on building resilience
around these.
Key features of our BCM
advice include;
Fit for purpose advice and
deliverables. Our solutions dont
come out of a box. Every client gets
advice that is appropriate for their
industry sector, size, critical issues and
level of sophistication. We recognise
and respond to challenges that may
exist within an organisation, such as
diversity between different business
units, multinational operations or
extensive supply chain dependencies.
We tailor our reporting output to meet
the culture of our clients, building
plans in reference card format, flow
diagrams, online and in traditional
paper based formats.
A focus on protecting reputation,
revenue and key processes, not
simply assets and facilities. Business
continuity management used to be
about protecting buildings and IT, and
for some advisory companies it still is.
At Marsh Risk Consulting, we think
about our clients businesses
according to their strategic objectives
and the critical processes that
underpin these, and concentrate on
building resilience around these.
Global methodology. Wherever your

business trades in the world, you can
be assured of the same approach to
BCM advice from Marsh Risk
Consulting. International clients can
build global strategies and plans, safe
in the knowledge that they are joined
up and make best use of available
resources.
Defining industry best practice. Our
people are not just leaders in
providing BCM advice. They have
helped to develop some of the
business continuity industrys
defining standards, including the
British Standard for BCM, BS 25999.
Linkages to risk and insurance. At
Marsh Risk Consulting we encourage
our clients to think about risk in its
widest sense. Investment in BCM may
well have the potential to deliver
value to a corporate risk management
programme, or to improve the cost or
terms of insurance. We have the skills
and oversight to manage such
considerations for our clients.
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Our services
Capability reviews:
Through formal reviews, we help clients to
correlate their BCM requirements with the
availability and quality of their plans. This can
include an assessment of policies and protocols
at group level, including group standards and
frameworks, risk registers and crisis
management plans, as well as an assessment of
BCM implemented at operating company level.
Where there are gaps, we help clients to define
what success might look like, and develop
realistic implementation plans to improve their
performance going forward. These solutions
typically include exercising plans at all levels.
Exercising:
Marsh Risk Consultings range of exercising
solutions are focused on evolving business
continuity plans into business continuity cultures,
through training for senior executives, rehearsing
of emergency response and crisis management
procedures and testing of recovery plans.
Plan building:
We assist clients in identifying and analysing their
key business processes, and developing and
enhancing their business continuity whatever
their current levels of sophistication. A common
approach underpins this process, but plans
themselves are designed around our clients, to
ensure maximum usage and value for them.
Programme management:
With the help of Marsh Risk Consulting, clients
develop their existing plans into programmes of
continuous BCM improvement, based on a
framework linked to improving levels of
resilience. We can help to facilitate this process
on their behalf, ensuring consistency of
approach and freeing up valuable project
management resource. Our people are also
skilled and experienced in winning the hearts
and minds of senior managers, a vital
component of a successful BCM programme.
Crisis management
planning:
Marsh Risk Consulting regularly assists clients in
developing crisis management plans, and
training staff expected to be at the apex of a crisis
with the appropriate skills to manage multiple
stakeholders under pressurised conditions.
Supply chain resilience:

A business continuity strategy that ignores
relationships with key suppliers is unlikely to
work in practice, since many principal exposures
exist outside of a companys own infrastructure
or direct control. Marsh Risk Consulting helps
clients to understand the role that suppliers play
in critical business processes, to identify the
risks and key impact points, and to build
protection around them.
Supply chain resilience often forms an element
of our programme management approach, as
clients broaden their definition of continuity to
involve external stakeholders.
For smaller businesses that are new to business
continuity, or require less complex solutions to their
needs, Marsh Risk Consulting has a full range of
tailored services intended to assist them in
reviewing, exercising and implementing their plans.
Product risk management:

Marsh Risk Consulting can help clients to identify
and manage the product-related risks within their
operations. We assist clients to make safer
products, reduce the likelihood and severity of
major product risk events, ensure regulatory
compliance, conduct effective recalls and
ultimately protect both clients and their brands.
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Marsh Risk Consulting provides

advice to clients around a range
of core BCM solutions.
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Case
studies
A national
petroleum company
Need:
Develop a company-wide
framework of BCM, including
recovery plans for the most critical
areas of the business.
Marsh solutions:
1. Designed and implemented an
organisation-wide BCM policy
and framework, in line with
BS 25999.
2. Developed impact and risk
analyses of critical business
areas, designed recovery
strategies and produced business
recovery plans, linked to existing
emergency response plans.
3. Facilitated initial plan testing.
Our client is an oil and gas production and refining

company in the Middle East. It provides petroleum
(domestic, manufacturing, motor and aviation) fuel
products. The company also exports refined
petroleum product around the world by sea.
The company embarked upon a programme of risk
identification and, in conjunction with its insurers,
identified the lack of business continuity planning as a
risk to its business. In particular, this study identified a
number of critical refinery operational areas where this
risk was extremely high. Marsh Risk Consulting was
appointed to design and implement a BCM framework
across the business.
Marsh Risk Consultings BCM consultants and
refinery engineering specialists worked together to
analyse the processes, impacts, risks and in-scope
production activities. The output helped the
company to understand its business better, and
which ultimately led to fit for purpose and robust
recovery plans for the critical production areas of its
refinery operations.
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Our client is a major international sporting and music

entertainment presenter and the owner of a number
of international sports and entertainment venues.
Our client identified a requirement to become an
industry leader in best practice and implementation
of BCM. Marsh Risk Consulting originally worked
with our client to assess its BCM and identified the
need to upgrade the existing incident management
and business recovery capabilities to complement
the high standard of emergency response
capabilities that had already been developed. A
programme was therefore developed to roll out BCM
throughout the business at a flagship site with the
aim of then using this approach as a model for the
further rollout of BCM to the organisations other
venues and associated operations.
These plans have been shown to be effective, helping
our client to deal with a number of serious incidents
that have occurred since the plans were developed.
Marsh Risk Consulting continues to work with this
client, to assist the organisations management to gain
the associated benefits from its investments in BCM.
Major international
sports and
entertainment group
Need:
Develop comprehensive BCM,
including recovery plans for the most
critical areas of the business at one of
the organisations flagship sites.
Marsh solutions:
1. Designed and implemented a
BCM policy and framework, in
line with BS 25999.
2. Developed impact and risk
analyses of critical business
areas, designed recovery
strategies and produced
business recovery and crisis
management plans, linked to
the emergency response plans.
3. Delivered rehearsal exercises to
senior management.
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FTSE 250 defence and aerospace

electronics group
Need:
Develop a company-wide framework of BCM, including group-level
crisis management and business unit business continuity plans (BCPs).
Marsh solutions:
Case studies
continued...
1. Implemented a standardised approach to developing BCPs at each

business unit within the group, as well as creating a crisis
management plan at group level.
The Group is a global engineering organisation specialising in

extreme environment components and smart sub-systems for
aerospace, defence and energy markets.
When reviewing the groups overall risk management
programme in 2002, it was identified that there was no standard
approach to BCM. This was mainly due to multiple acquisitions
that had been made over preceding years. To meet best practice
in corporate governance, it was agreed that a review of existing
BCM requirements was necessary, with any identified gaps to be
addressed.
After reviewing BCPs at multiple operations globally, a lack of both
consistency and quality was identified. A programme was therefore
developed and rolled out in 2003. This programme has assisted
over 30 business units to implement BCM successfully, and is
consistently highlighted in the groups annual report. These plans
have been shown to be effective, most notably through responding
to the Buncefield fire and explosion in December 2005, as well as
being implemented for other less serious interruptions such as a
tornado in Texas and a furnace fire in Ohio.
Marsh Risk Consulting continues to work with this client, ensuring
newly acquired business units go through the standard BCM
programme, as well as carrying out ad-hoc sample audits and
crisis management exercises with the more mature business units.
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Marsh Risk Consultings global business continuity

practice comprises over one hundred fully-employed
professionals across five continents.
About Marsh Risk Consulting
Marsh Risk Consultings global business continuity
practice comprises over one hundred fully-employed
professionals across five continents. Experience within
this team stretches across public, industrial and
commercial sectors, and all verticals.
We assist our clients in developing, implementing and
enhancing business continuity and operational resilience
capabilities. Our portfolio of expertise includes incident
management, business/operational recovery and crisis
management solutions as well as a deep understanding of
risk issues around supply chain, product recall, information
technology and communications.
Our clients range from small privately-owned companies to

some of the worlds largest multinational
organisations.
Marsh Risk Consulting is a thought and industry leader in
risk management and has been voted winner of the
Excellence in Business Continuity in the Insurance
Industry category at the Business Continuity Awards five
out of the last six years.
HOME
For more information, please contact:

Rod Ratsma
Head of Business Continuity and Resilience EMEIA, Marsh Risk Consulting
+44 (0) 1908 846012
[email protected]
The information contained herein is based on sources we believe reliable and should be understood to be general risk
management and insurance information only. The information is not intended to be taken as advice with respect to
any individual situation and cannot be relied upon as such.
In the United Kingdom, Marsh Ltd. is authorised and regulated by the Financial Services Authority for
insurance mediation activities only.
HOME
Forensic Accounting and Claims Services

Business interruption insurance review
Business interruption (BI) insurance provides compensation when an insurable

event prevents a business from achieving its financial targets, so that it suffers a loss.
When combined with an effective business continuity management programme,
properly structured BI insurance is a cost effective solution that goes a long way to
mitigating the effects of a major business disruption.
The potential loss from BI is often far greater than the loss
from associated property damage. The revenue of a
business will vary from year to year depending on
business performance, growth, external factors and the
competitive environment. In the current fast changing
business climate it is vital to consider how such changes
could impact the organisations exposure to revenue loss.
If the business structure has changed due to acquisitions,
significant organic growth, outsourcing or contractual
arrangements, we would recommend a review of the
insurance policy to ensure limits/coverage extensions are
still appropriate. A review of the organisations individual
exposures and recent business changes would be
performed to identify the impact on policy limits and BI
extension clauses to maximise the benefit of coverage.
Identify the key components

Setting up an effective BI insurance programme requires
an in-depth risk assessment of both operational and
financial dimensions of a business. The outcome of the
assessment determines the breadth and basis of cover,
the BI sum insured, indemnity periods and essential cover
extensions. Other components that need to be considered
include supply chain interdependencies, redundant
capacity, changing customer demands and market trends.
The FACS team at Marsh Risk Consulting provides

clients with a complete BI Insurance review service.
The in-house expertise at the clients disposal includes
forensic accountants and former loss adjusters who
have worked for insurers in the recent past. We
examine all key facets of the BI insurance programme
to ensure that our clients have a clear understanding of
the BI exposures that they may face and can prepare an
effective BI presentation for the insurance markets.
Our approach
Our review will identify amendments required to
coverage and provide a greater understanding of the
real risk to the organisation. Highlighting how business
continuity and disaster recovery plans will mitigate any
loss ensures an accurate presentation of the risk to
underwriters and may result in premium savings.
A key element is the level of the sum insured. Our
forensic accountants will consider trends and seasonality
to ensure an accurate figure and also avoid penalties and
premium leakage by purchasing too high a level of
coverage.
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Working with Marsh Risk Consulting

Marsh Risk Consulting has a unique insight into BI insurance based on our
first hand experience. Globally, Marsh Risk Consulting provides BI analysis
and claims consultancy for companies in all industry sectors. We bring an
unparalleled combination of insurance, accounting, engineering, business
continuity and supply chain skills to the task. The FACS team comprises
insurance professionals who deal with major BI losses following explosions,
hurricanes and major fires. Using this real experience of dealing with claims,
they consider the effect of a significant loss to test the coverage pre event.
With the assistance of business continuity and property damage experts, the
Marsh Risk Consulting approach is unrivalled in its practical approach to
business interruption.
Our BI insurance review includes

Direct BI analysis
We examine loss of revenue/insurable gross
profit due to an insured event at an
organisations own premises or facility. It
includes assessments of maximum
foreseeable loss (MFL), normal loss
estimate (NLE) taking into account all
mitigating actions, indemnity periods and
sums insured.
Contingent BI review
We identify and consider
the risk exposures from
damage at the premises
and facilities of suppliers,
customers or utility
organisations.
BI interdependency review
We assess the organisations overall BI loss
potential taking into consideration its
interdependent operating sites and shared
facilities. We draw out the significant
exposures and quantify risk accumulations.
BI insurance
We review existing cover
and make
recommendations for BI
insurance programme
design.

MARSH DISASTER RECOVERY PORTAL
MARSH
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MARSH
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sub-nomenclature
GLoBaL ProPertY
Bowring marshs global property team comprises a

team of over 70 dedicated brokers. We work
alongside our marsh colleagues to advise clients on
the optimum placement strategy for their property
risks around the world.
Our key industries

financial institutions
food and beverage
hospitality and gaming
manufacturing
mining and metals
gloBAl property risKs

our brokers offer a collective
in-depth knowledge and experience
of global risk managed accounts for
companies. We also specialise in
providing natural catastrophe
solutions.
our clients benefit from our broad
understanding of evolving business
risks around the world and our
ability to provide detailed advice
regarding applicable lines of
coverage. We also work closely with
clients to address individual
challenges as they arise to
customize innovative property
solutions to suit their needs.
Wording specialists within the team
craft tailored policy clauses required
by large clients with sophisticated
business needs.
creAtiNg vAlue
With volume
globally, we place total premiums of
over usd1.2 billion into the
international marketplace on behalf
of over 560 clients.
in london alone we access over 40
lloyds syndicates and companies
with whom we negotiate the
optimum terms and conditions for
our clients on a face-to-face basis.
Bowring marsh has the largest
fortune 100 portfolio in the
marketplace, reflecting our
expertise in providing complex,
global solutions.
power and utilities

real estate
retail/wholesale
technology, media and
telecoms
transportation (including
rail)
We have a team of claims
consultants who are
responsible for coordinating
and collecting complex
claims. Both of these teams
work alongside the specialist
account broker to ensure the
client is receiving efficient
and accurate service at every
stage of the claim.
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North American
property facilities
In addition to our tailored open
market placements for North
American clients, we offer three
facilities and also write deductible
buy downs.
Bowring Marsh provides up to
USD75 million of capacity with a
USD25 million excess attachment
for National Brokerage accounts.
Lancashire Insurance Company
Limited provides this products
security exclusively to our Bowring

Marsh property team in Bermuda.
XL 450 provides USD450 million of
capacity with a USD50 million
excess attachment Lloyds
security and London Companies.
Public Entity specialises in
municipalities. These facilities can
be activated within 48 hours
Lloyds security.
For more
information
contact:
Bermuda
Tom Cechini
Property Department Manager
E: [email protected]
T: +1 441 299 8848
Hong Kong
Sandy Ng
Client Manager
T: +852 2301 7677
London
About Bowring Marsh
Tony Waller
International Property
Placement Leader
T: +44 20 7357 3473
New York
Dublin
London
Zrich
Bermuda Madrid
Beijing
Tokyo
Shanghai
Hong Kong
Miami
Tom Davies
North American Property
Placement Leader
T: +44 20 7357 1030
Singapore
Dubai
Bowring Marsh Offices
So Paulo
Bowring Marsh
Representatives
Bowring Marsh is the exclusive, specialist international placement broker for

Marsh. Working seamlessly with Marsh, Bowring Marsh provides access for
clients, wherever they are in the world, to international insurers through its
global insurance placement platform.
Miami
Fabio Magalhaes
Head of Office
T: +1 305 341 5067
brazil
David Pea
Senior Property Broker
T: +55 113 741 7728
Bowring Marsh Offices
Singapore
With over 260 insurance brokers located across all the major international
insurance hubs, we provide customers with options in the international markets,
driving price and coverage by putting international and domestic insurers into
competition against each other and by differentiating our customers risks,
whether they are strategic insurance buyers, claims-distressed, exposed to natural
catastrophe or buy large limits due to the nature of their operations.
Min Byung Wan

Property Placement Broker
T: +65 6327 3321
Placing in excess of USD2.2 billion of premium for more than 1,500 customers
annually, Bowring Marsh uses the breadth and depth of its portfolio experience
and industry knowledge to innovate, customize, and broker our clients insurance
contracts with international insurers.
The information contained herein is based on sources we believe reliable and should be understood
to be general risk management and insurance information only. The information is not intended to
be taken as advice with respect to any individual situation and cannot be relied upon as such.
In the United Kingdom, Marsh Ltd. is authorised and regulated by the Financial Services Authority
for insurance mediation activities only.
Copyright 2011 Marsh Ltd. All rights reserved.Ref: BM.PFS.12
Tokyo
Tetsuro Nakazawa
Head of Bowring Marsh Japan
T: +81 3 5334 8218
Zrich
Chris McManimon
Senior Property Broker
T: +41 44 285 9324
Nathalay Haussener
Property Broker
T: +41 44 285 9363
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Global Claims Practice
Lessons Learned from the

Catastrophes of 2011
The Marsh Point of View
HOME
Foreword
Lessons and Regeneration
Listening, Learning and Delivering
2011 has been characterized as the Year of the CAT. While it

may not have been the largest CAT year on record, it was
truly an exceptional one in terms of frequency, severity, and
proliferation of issues arising from floods, windstorms,
earthquakes and other disasters.
The magnitude and impact of the catastrophic events of

2011 were truly extraordinary. While many of the risks were
understood, the scale of the devastation was unexpected,
exceeding existing loss-modeling predictions. Indeed, the
complexity and cascade of the events in Japan show that
even our understanding of the nature of risk was
challenged in terms of multiple and concurrent causation.
First and foremost, we recognize the human tragedy

caused by such catastrophic events. Indeed, we are sad to
say we lost three Marsh colleagues in the Christchurch
earthquake.
In the aftermath of catastrophic events, one of our roles is
to help facilitate and provide the means for recovery. While
not all damage and economic losses are insured, there is
still a significant insurance and risk management response
to the events of 2011. Catastrophes provide the insurance
industry with a profound opportunity to demonstrate its
value and its important role in the process of regeneration.
Along the way, we have all taken on important lessons that
merit closer examination and sharing.
The aim of this document is to chronicle the salient issues
and suggest ways in which we can deal with them better in
the future. Marshs global presence makes us well
positioned to analyze the catastrophes, identify individual
lessons, and perhaps observe some general themes that
characterize them all.
I hope you find this study to be stimulating, but it cannot
be exhaustive. We are fortunate to be in an industry that is
dynamic, and we will all undoubtedly encounter new
challenges and opportunities. Lessons will always continue
to be learned.
Many of our clients were severely impacted by the

catastrophes. Our Claims colleagues worked tirelessly on
their behalf, and I am so proud and impressed by their
efforts, as well as the resilience of our clients in the face of
such adversity.
In addition to addressing the immediate needs of clients
affected by disasters, Marshs global resources and claims
expertise equip it exceptionally well to draw and share
lessons from such catastrophes. We share our perspective
on what worked and where we consider the response to
have fallen short.
In this way, we believe we can contribute significantly to
improved preparation for enhanced resiliency during, and
speedier recovery from, future catastrophic events. We
look forward to engaging in a constructive dialogue with
our clients and insurance partners on these issues. Our
mission is to learn, challenge and then shape enhanced
solutions. We welcome and encourage our clients active
participation in this process.
We will continue to drive leading edge insurance and risk
products by listening, learning and delivering. This document
is a step along that journey, and I look forward to discussing
with you the issues and observations presented here.
David Pigot
Chairman, Global Claims Practice
David Batchelor
President, International Division
i Lessons Learned from the Catastrophes of 2011
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Contents
Case Studies
Denial of Access ....................................................................................................... 2
Strike, Riot and Civil Commotion or Terrorism? ........................................................ 4
Flood versus Storm .................................................................................................. 6
Contingent Business Interruption Resulting From Supply Chain Failure ................... 8
72 Hours Clause .................................................................................................... 10
Contacts ........................................................................................................ 12
Marsh 1
HOME
Denial of Access
Issue
How is Denial of Access treated by insurers when it lasts for weeks,

months or even years?
Background
Business interruption (BI) insurance policies
typically respond to loss due to insured damage
at the insureds property. Contingent BI extends
to the property of others, but the nature of the
damage must be of a type covered by the
insureds policy.
A further extension includes cover for BI due to
prevention or denial of access to the insureds
property. This is valuable, as a business may not
be able to trade if a building or district has to be
cordoned off, or if access to it is hindered due to
factors such as:
a fire or some other peril (such as flood,
earthquake)
a police or medical emergency
the outbreak of an infectious human or animal
disease (for example, foot-and-mouth disease)
a hazardous material spill
The specific language of denial of access clauses
will vary, but here is an example:
Denial of Access
Loss, as insured by this Policy and resulting
from Damage or threat of Damage to any
property in the vicinity of the Premises, or
from any threat to human life, that prevents
or hinders the use of or access to the
Premises, will be deemed to be loss
resulting from Damage to property used by
the Insured at the Premises for the purpose
of the Business.
1 Author of the 9th edition: Harry Roberts
2 Lessons Learned from the Catastrophes of 2011
Cover for denial of access may be sub-limited to

a currency amount, or to a percentage (e.g. 5 or
10 percent of the limit of the BI section). Often,
there is a deductible or waiting period of a
number of hours or days, so that loss due to
short-term denial of access is not insured.
In fact, denial of access has historically been
regarded as a relatively short-term
phenomenon, and the classic BI text Riley on
Business Interruption Insurance1 refers to closure
of a street in Liverpool, England for 10 days in
1960.
However, not all denial of access is short-term.
Recent catastrophes in New Zealand and
Thailand have featured longer term issues, and
this raises questions about the appropriateness
of typical denial of access cover.
HOME
Case Study Christchurch Earthquake
February 2011
In the Central Business District (CBD) of Christchurch, New

Zealand, a sizeable cordon remains in place more than a
year since the magnitude 6.3 earthquake of 22 February
2011. The cordon may not be lifted until April 2012, or
even later.
Around 1,000 buildings in the CBD are expected to be
demolished. With so many unsafe buildings, and with the
threat of continuing aftershocks, the public is not
permitted entry to the CBD. Access is by permit only and
guarded by the armed forces.
There are shopping malls, hotels, and businesses within the
cordon, and a further complication with denial of access is
the argument that these businesses would have been unable
to operate even if they had suffered no damage at all.
A similar situation occurred in New Orleans in 2005, where an
Orient Express Hotel (OEH) was damaged by hurricanes Rita
and Katrina. This was subsequently the subject of litigation and
it was decided that even if the hotel had not been damaged, it
would have suffered the same business interruption loss
because of the devastation to the surrounding area.
Lessons Learned
1. Check the policy test with regard to BI being but for
the damage or but for the event.
2. Check the policy for the adequacy of Denial of Access
sub-limits, and/or their aggregation. An extended
period whereby access is denied (as seen in
Christchurch and Thailand) can expose any limitation.
3. It is very helpful if the Denial of Access extension covers
not just denial of access but hindrance as well. Business
can suffer if a location is difficult or highly inconvenient
to get to, just as much as if access was physically
impossible.
This is what has become known as the

windfall loss scenario.
4. By the same token, there may be an interruption to the

business caused by threat (e.g., scared to gain entry) or
simple impracticality (e.g., there may be access to an
airport, but there may be no planes). This was a
significant issue following 9/11 when businesses at
airports claimed BI losses due to the closure of all
airspace to commercial flights; and hotels and other
hospitality and travel related businesses claimed for
losses due to sharp reductions in travel.
There might have been a different outcome if the test was but
for the event as opposed to but for the damage. The main
issue, however, was how the policy should respond to the
situation where both damage to the hotel and damage to the
wider area were causes of the BI loss. A recovery was made for
BI losses under the Denial of Access cover, but this was sublimited (unlike that available under the overall BI cover).
5. Controversy can also arise regarding what constitutes a

coverage trigger. Several insurers have asserted, for
instance, that the presence of floodwaters on access
roads or grounds does not constitute physical damage.
They have said that flood damage to buildings,
structures or other property must first take place (as seen
in the blizzards of 2010 in the eastern United States,
where roads were impassable due to heavy snowfall).
While the OEH case continues to attract controversy, it

serves as a good example of how clients should consider
Denial of Access in the context of the available BI cover.
It remains to be seen how the New Zealand courts will
interpret this issue, but it has greater relevance if there is a
sub-limit for Denial of Access.
These observations are general and not policy or

circumstance specific. It is recommended that you consult
with your advisors before considering action in presenting
and pursuing a claim.
Dated: March 2012

Marsh 3
HOME
Strike, Riot and Civil Commotion or

Terrorism?
Issue
The 2011 public disturbances in Egypt, the UK and elsewhere have

re-ignited the debate that came to prominence in the 2010 Thailand
disturbances; namely, what constitutes Strike, Riot and Civil Commotion
(SRCC), and what constitutes Terrorism?
Background
All Risks policies will typically exclude Terrorism.
Separate Terrorism cover or broader Political
Violence cover may be available, but this does
not necessarily provide certainty. The definition
of Terrorism as excluded may not be the same as
the definition of Terrorism as extended.
In addition to recoveries potentially available
from insurance, care must be taken to recognize
and act upon any local legislation and related
requirements, so as to preserve any other form
of recovery. For example, following the UK riots
of August 2011, the Riot (Damages) Act 1886
required policyholders to register their claim for
compensation from police authorities within a
set timeframe (originally fourteen days), and by
using a prescribed form. Failure to do so could
preclude recovery under the Act.
Another common issue in civil unrest situations

concerns the number of events and the
potential application of multiple deductibles.
There may be a 72 Hours Clause in the policy,
and the definition of an event is important,
although not all policies contain a specific
definition.
The situation in Egypt in the early part of 2011
allows us to illustrate the SRCC versus Terrorism
issue.
HOME
Case Study Egypt Unrest
January 2011
Lessons Learned
1. Pre-loss, compare exclusionary and inclusionary
Terrorism language, to check that the coverage
dovetails. Also consider what other coverage might be
available.
2. Capture claims data and evidence of the business
decisions made during and subsequent to the unrest.
Close co-operation with insurers is important here, as
all decisions must be justifiable if they impact a
potential claim recovery.
The events in Egypt began on 25 January 2011 and have

variously been described as non-violent civil resistance,
civil disobedience, popular uprising, revolution, and
terrorism. These terms are frequently used generally and
without appreciation of any insurance policy implications.
However, the interpretation of these terms can have a
significant impact on policy response.
The unrest is generally considered to have ended when
President Mubarak stepped down on 11 February 2011.
There was much confusion regarding the definition of the
events and the related insurance implications. The Insurance
Federation of Egypt provided some clarification when it
issued a statement on 8 March 2011, that concluded
Accordingly, the Federation recommends

that the insurance companies should
consider the claims submitted to them as per
the conditions, terms, limits of coverage and
exclusions of insurance policies signed with
the insured in connection with the coverage
of Riot, Civil Commotion and Strike Perils.
This statement prompted a flow of payments from insurers,
but some claims continued to be contested for a variety of
reasons, including:
the non-binding nature of the Federations statement
(although it was clearly influential)
the variety of language in insurance clauses, some of
which exclude civil commotion assuming the
proportions of a popular rising, which introduces an
additional requirement of scale
the broad definition of Terrorism as stated in some
policies, which might embrace activity beyond the
popularly understood meaning of the word terrorism
3. Review all possible exclusionary language in the

context of the specific claims circumstances. Your
insurance advisor can help here, but legal input might
also be required.
4. Be careful when characterizing loss related activity,
especially in the aftermath of a claim, and with
particular reference to the insurance policy and
potential exclusionary language.
5. Encourage insurers to consider the events in context,
and not solely with the benefit of hindsight. For
example, looting may just be looting, and not part of a
co-ordinated uprising as it might appear afterwards.
6. Caution should be taken in using descriptions of events
used in the media, as they are likely to be inaccurate
and not reflective of policy definitions.
7. Consider the objectivity of statements made about the
events. For example, statements made following a
regime change (perhaps characterizing the events as
civil commotion), might be different than those coming
from a prevailing regime (perhaps characterizing the
events as terrorism).
8. Seek certainty of coverage at the earliest opportunity.
This may be achieved by requesting an early interim
payment.
Since the Egyptian unrest, Marsh has seen that more
property policies for Egyptian risks are now excluding
SRCC, so attention should be paid to see if this (and other)
perils are being further limited on renewal.
Dated: March 2012
insurer portfolio consideration, being a concern that

precedent is not established for greater exposures in
other territories, such as Thailand
Marsh 5
HOME
Flood versus Storm

Issue
Severe weather events in Australia in late 2010/early 2011 caused

insurers to look at policies in the context of whether the damage to
assets was caused by Flood or Storm.
Background
In Queensland, Australia, a standard property
All Risks Policy will typically exclude cover for
Flood risks unless specific arrangements have
been made to include this cover. On the other
hand, Storm is a risk which is typically covered.
If Flood risks are specifically excluded from
cover, careful consideration as to the wording of
the exclusion is needed in the event of a loss.
By way of example, a standard policy wording
commonly used in Australia2 excludes physical
loss, destruction or damage occasioned by or
happening through Flood, where Flood is
taken to mean
the inundation of normally dry land

by water overflowing from the
normal confines of any natural
watercourse or lake (whether or not
altered or modified), reservoir, canal
or dam.
2 Mark IV Industrial Special Risks Policy. There is some write
back in cover in this standard exclusion.
Sometimes it is not clear whether the damage

has been caused by Storm as opposed to Flood.
This is an issue where there is a Flood exclusion,
as it is a general principle of insurance that if
there are two equally competing causes of a
loss, one covered (in this case Storm) and one
expressly excluded (in this case Flood), then the
whole loss is excluded.
Timing of the damage can be important. In such
cases, if it can be established that all, or part of,
the damage was caused by the Storm first (e.g.,
rain water run-off) rather than Flood, then the
Flood exclusion will not operate to exclude the
damage that occurred first.
Usually hydrological evidence is required to
assist in determining whether assets have been
damaged by Flood as defined in the Policy.
Eyewitness and objective evidence of the source
of the water and the cause of the damage can
assist as well.
It is not uncommon, however, for there to be
differing opinions between experts which can
result in disputes between the insurer and
policyholder.
HOME
Case Study Queensland Floods
December 2010 / January 2011
In late 2010 and early 2011 severe rain and flooding

caused extensive damage across the State of Queensland
in Australia. The Insurance Council of Australia, which
collates statistics from general insurers, estimates insured
losses alone will be AUD 2.4 Billion.
Careful consideration of each policyholders property
insurance policy programme was required to determine
the extent of cover (if any) for the losses, but we did not see
a common theme of issues across the major losses. This
was due, in the main, as a result of the varied insurance
arrangements in place for Flood risks.
Policyholders usually undertake careful analysis of the risk
of Flood to their assets before making decisions regarding
the extent of cover for Flood they wish to purchase (if any)
in consultation with their insurance advisor.
Some examples of the types of property insurance
arrangements seen in this context are set out below:
Flood covered
Flood cover specifically excluded
Flood covered, but the policy is tailored, with all or
some of the following by way of examples:
certain assets excluded from Flood cover (e.g., open
cut pits)
limits on liability, and
higher/aggregate deductibles.
Most of the large losses we have seen for large corporations
had Flood covered, or Flood tailored policies.
The tailored policies required close consideration of the
specific policy terms and definitions, having regard to the
circumstances of the losses.
For example, for those policyholders that had Flood
covered but certain assets were excluded, close scrutiny of
the cause of damage to the Flood excluded asset(s) was
required. This became even more critical if the damage to
excluded asset(s) resulted in Business Interruption losses.
Lessons Learned
1. Policy documents need to be carefully reviewed to
ensure policyholders understanding of the Flood cover
in place, particularly where there are tailored
arrangements.
2. Flood exclusions and any Flood definitions need to be
carefully considered.
3. In the event of a loss, policyholders should not
categorize a loss as Flood before proper consideration
is given to the evidence available (i.e. hydrological and/
or other evidence).
4. Photos and records of the events as they unfold can
assist in determining the cause of the damage, and
whether or not the cause is Flood.
5. In the U.S., it is important to get accurate and current
flood zone determinations to assess the need or
availability of Federal Flood Insurance. For global
policies, carefully look at both limit and deductible
wordings, as some policies may have higher
deductibles for locations within High Hazard Flood
Zones or Foreign Equivalent. Countries may not have
formal flood zone determinations, so there should be
clear understanding of what constitutes a high hazard
flood zone.
circumstance specific. It is important to consult with your
advisors before considering action in presenting and
pursuing a claim.
Dated: March 2012

Marsh 7
HOME
Contingent Business Interruption

Resulting From Supply Chain Failure
Issue
What challenges do clients face when presenting a Contingent Business

Interruption (CBI) claim, as opposed to a direct Business Interruption
(BI) claim?
Background
CBI coverage is available under many forms and
each form includes various options. For many
CBI losses there are questions relating to the
applicability of coverage due to the forms and
coverage options that were in place at the time
of the loss. Examples of the type of coverage
issues observed during the CBI claim process
include the following:
local insurance policies did not include

Contingent Business Interruption coverage.
policies included very high deductibles.
policies offered very low CBI limits.
policies insured CBI if the cause of loss was
due to physical damage of the type insured,
but not for other causes (service interruption,
ingress/egress, etc).
policies covered CBI incurred in local country
only, but did not cover global time element
interdependent losses and/or global CBI
outside of the local country.
policies covered direct CBI but not indirect
CBI.
policies contained very low indirect CBI sublimits.
Gross Earnings or Gross Profits coverage
forms limited the recovery period.
concurrent causation, being whether CBI
losses were caused by Earthquake, Tsunami,
Radiation or Civil Authority (or a combination
of these).
HOME
Case Study Tohoku Earthquake
March 2011
location where physical damage or other coverage

triggering event occurred
cause of loss at contingent location
identification of location as belonging to a supplier or
customer
classification of supplier or customer as direct or indirect
business units adversely affected
specific products adversely affected
The Tohoku, Japan earthquake and tsunami on 11 March

2011 resulted in a dynamic global Contingent Business
Interruption (CBI) event, likely the largest CBI loss
occurrence ever experienced by the insurance industry.
As a result of the damage sustained in the Tohoku region,
global time element losses were incurred due to (i) third
party supply chain failures; (ii) damage to customers
facilities; (iii) damage to customers customers facilities;
(iv) damage to customers suppliers facilities; and (v) the
breakdown of intercompany fulfillment, leading to
interdependency losses both upstream and downstream in
the operational process.
As with most CBI losses, the issues relating to coverage
were numerous. Further, most of the causation and other
claim information required by the insurance adjusters was
not frequently at hand, as the physical damage or other
causes of loss did not occur at the policyholders operating
locations.
With any catastrophe, the quantification of the losses can
become very complex. The overall market demand for
certain products and services can immediately decrease,
(e.g., entertainment, consumer products, food and
beverage), while the demand for other products and
services can increase (e.g., safety products, construction,
energy saving devices).
It is not often easy to identify the CBI loss of sales resulting
from a covered cause of loss incurred at a suppliers or
customers operating locations. Combined with difficulty
in identifying when the resumption of operations truly
occurred at that supplier or customer, the contingent lost
sales calculations can be both challenging and subjective.
Documenting the contingent loss of sales and resulting
loss of income can be just as challenging. Adjusters at
various times will ask for any and all of the following:
customers who ultimately buy products that were

adversely effected
ability to make-up lost sales
sales histories for products / customers adversely
affected
Lessons Learned
1. Consideration should be given to securing indirect CBI
coverage in addition to direct CBI coverage.
2. Diligence should be shown in identifying sufficient CBI
limits.
3. The geographic regions stated in the policy could be
significant. If the policy restricts location to the U.S. for
example, the CBI losses to clients domiciled inside the
U.S. might not be covered for an event occurring
outside of the U.S. (such as the Japan earthquake).
4. With regard to Suppliers Extension coverage,
consideration should be given to including named or
unnamed suppliers; and also whether Tier 1 or Tier 2
suppliers (or beyond) should be included.
5. Immediate and detailed evidence of all losses and their
presumed causation should be documented and
preserved.
With the ever-expanding operational reach of multinational companies, the advancement of a global
marketplace, and supply chain maps that cover the globe,
CBI coverage is taking on a more important place in the
risk transfer process than ever before. CBI coverage can no
longer be a simple add-on to the insurance policy.
Valuation and assessment must be part of the process
when establishing CBI limits and coverage options.
Dated: March 2012
Marsh 9
HOME
72 Hours Clause
Issue
How does a 72 Hours Clause work, and is it advantageous or

disadvantageous to policyholders?
Background
Many property insurance policies have provisions
that treat all loss that occurs as a result of damage
from a specified cause (e.g., windstorm, flood or
earthquake) as being one event, if it occurs within
the same 72 hour period.
This can be achieved by a specific clause, or as part
of a definition that has follow-on effects on
coverage. For example, In this Policy, Event
means an event or series of events arising from any
one cause during any period of 72 consecutive hours.
Whether a 72 Hours Clause favors the client or
insurer depends on the facts of the event and
the policy wording. Some 72 Hours Clauses also
allow the client to choose the start time of the
72 hour period(s).
The aggregation of loss into one (or more) 72 hour
periods might suit a client if they would otherwise
incur multiple deductibles based on individually
identified physical damage. Let us take an example
of a sequence of hurricanes that cause damage on
1st and 2nd August, and on 4th and 5th August. A
policy with a 72 Hours Clause would likely treat
this as two events. A policy without a 72 Hours
Clause might, depending on the wording and
precise facts, treat this as four events.
However, the flooding in Thailand in late 2011 has
shown us that a catastrophic condition can last for
many weeks, with increasing physical damage. The
claim(s) might be subject to multiple deductibles
according to the language of a 72 Hours Clause. If
all of the damage occurs within the first 72 hours,
then this can be argued as one event / deductible.
We have seen that a 72 Hours Clause can result in
multiple deductibles, but it might also result in
multiple limits as these are reinstated for each and
every loss. This can apply to sub-limits also, subject
to any aggregate limits that might exist in the policy.
So, a 72 Hours Clause needs to be considered in

terms of how it impacts on policy deductibles
and on policy (sub) limits.
Overriding all of this is the policy definition of
loss (often expressed as a loss or series of losses
arising out of one event), and how it is
reconciled with the 72 Hours Clause.
Another good example of an extended
catastrophic condition is the 2011 flooding
throughout the U.S. along the Missouri and
Mississippi Rivers. Heavy snowfall throughout
the winter of 2011 created significant runoff
from the snowmelt. Flooding began in the
northern U.S. in early March, and progressed
southwards throughout the spring and summer.
Areas were affected by floodwaters until
September of 2011.
The virtually endless possible variations of claim
situations, and the significant potential effects
of aggregation on coverage, require careful
consideration.
Fig 1. (all in US$)
72 hours clause and $100k deductible
Loss
Deductible
Payout
01-Jan
$150,000
$100,000
$50,000
02-Jan
$50,000
$0
$50,000
04-Jan
$500,000
$100,000
$400,000
05-Jan
$200,000
$0
$200,000
Total
$900,000
$200,000
$700,000
no hours clause and $100k deductible

Loss
Deductible
Payout
01-Jan
$150,000
$100,000
$50,000
02-Jan
$50,000
$100,000
$0
04-Jan
$500,000
$100,000
$400,000
05-Jan
$200,000
$100,000
$100,000
Total
$900,000
$400,000
$550,000
HOME
Case Study Christchurch Earthquake
February 2011
Lessons Learned
1. Policies should be reviewed against likely loss scenarios for
potential application of deductibles, limits and sub-limits.
2. Consideration should be given to the definition of loss
or event, and how this might interact with the
provisions of a 72 Hours Clause.
Christchurch, New Zealand has seen literally thousands of

earthquakes and aftershocks during 2010 and 2011. This
includes major shocks on:
4 September 2010
26 December 2010
22 February 2011 (3 shocks over magnitude 5.5)
13 June 2011 (2 shocks over magnitude 5.5)
23 December 2011
New Zealands Nat Cat insurer (the Earthquake
Commission) had declared 15 quake events by the end of
December 2011. It may or may not be that all of these
earthquakes are attributable to the same or related
seismological condition, but for insurance purposes, a 72
hours clause reduces the need for a protracted debate.
As we have seen, a 72 Hours Clause can help to protect
policyholders against multiple deductibles where there is
loss due to repeated damage from the same cause within a
short period.
For example, consider a policy with a $100,000 event
deductible, showing the recoveries, with and without a 72
Hours Clause, of four loss events over a five day period. In this
example, a 72 Hours clause improves the recovery (see Fig 1.).
A client with a deductible expressed as a

percentage of the loss would not be affected
by the number of events causing damage.
3. 72 Hours Clauses often apply to named perils, so the

peril must be easily identified and distinguishable from
any separate and distinct perils. How the claim is
categorized can therefore be important.
4. If evidence of physical damage is gathered quickly after
a loss, this will help the accurate allocation of physical
damage loss between different events.
5. The claim recovery can be impacted by how the
deductible is expressed in the policy:
As a currency amount
As a percentage of the loss
As a percentage of the site value
6. If a policy has a deductible expressed as a percentage of
site value, then it needs to be understood at the outset
what constitutes a site, and how these values are
calculated and declared.
7. The adjustment process for catastrophic events will
require significant amounts of detailed documentation,
and it is critical to gather and record this information
immediately. In the cases of flood or storm, warnings
may occur well in advance of the physical impact, and
this information must be carefully recorded, including
warnings from governmental agencies, evacuation
orders, closures, curfews, etc.
Dated: March 2012
Typically for the Christchurch earthquakes, this type of

percentage deductible was expressed as 2.5 percent of the
loss. This meant that whether the loss was caused as a result
of one or four events, the deductible was always 2.5 percent
of the total loss. However, since the 22 February 2011
Christchurch earthquake, insurers in New Zealand are now
usually seeking deductibles at renewals which are a
percentage of site value, as is the case in Chile. This can lead to
further debate over what is the site value, and whether it
consists of a single building or a group of buildings. How the
values are scheduled and declared may be of assistance here.
Marsh 11
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Contacts
MARSH global claims practice
Chairman, Global claims Practice
Claims Leader EMEA
David Pigot
Phone: +44 20 7357 5738
Mobile: +44 7795 238419
[email protected]
nORTH aMERICA
Property Claims Leader
North America
CAT Claims Controller
Claims Leader
Asia
paul D. mcvey
Bob obrien
Graham purdon
Phone: +1 212 345 3928

Mobile: +1 917 743 3352
[email protected]
Phone: +1 202 263 7863

Mobile: +1 202 615 0543
[email protected]
Phone: +65 6327 7864

Mobile: +65 9838 2998
[email protected]
Claims Leader
Latin America & Caribbean
International Property
Claims Leader
Claims Leader
Pacific
jose goggi
Alan Morton
Richard Lance
Phone: +54 11 4320 5830

Mobile: +54 911 6280 5771
[email protected]
Phone: +44 20 7357 5331

Mobile: +44 7585 803085
[email protected]
Phone: +61 2 8864 8279

Mobile: +61 414 457 557
[email protected]
operations leader
michael annison
Phone: +44 1603 207 651
Mobile: +44 7909 524204
[email protected]
fORENSIC ACCOUNTING AND CLAIMS SERVICES (facs) pRACTICE

Global Practice Leader
Ken Giambagno
Phone: +1 212 345 1063
Mobile: +1 201 412 4133
[email protected]
North American Practice Leader
EMEA Practice Leader
Kevin M McCarthy
Christian Knutson
Phone: +1 312 627 6722

Mobile: +1 312 953 5955
[email protected]
Phone: +44 20 7357 2342

Mobile: +44 7585 803163
[email protected]
LAC Practice Leader
Asia Pacific Practice Leader
Maricarmen Marquez
John McKenzie
Phone: +1 305 341 5053

Mobile: +1 305 773 4204
[email protected]
Phone: +61 2 8864 8101

Mobile: +61 418 294 343
[email protected]
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Marsh 13
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Forensic Accounting and Claims Services

Insurance claims preparation
Events such as the London and Madrid terrorist bombings, the Buncefield Explosion and Asian
Tsunami have all shown that disasters, be they man-made or natural in origin, can strike at any
time and at any location. As well as the obviously tragic human consequences of such events,
the impact on businesses can be catastrophic. It is vital to the finances, operations and
reputation of companies affected by such disasters that they recover quickly and fully.
Key to this recovery is very often the insurance claim. Insurers will invariably employ an array
of experts to handle the large and complex claims on their behalf, and the question that a
company facing a major claim needs to consider is who is looking after our best interests.
Receiving timely and expert guidance through the myriad of claims-related issues is often the
difference between a companys successful and unsuccessful recovery. The Forensic Accounting
and Claims Services (FACS) team at Marsh Risk Consulting have an impressive track record of
helping clients to manage their claim submission through to a successful resolution.
Our insurance claim preparation service
It is often an overlooked fact that the company that has suffered
the loss is obliged to prepare and present their claim to its
insurer: it is then for insurers and their representatives to adjust
the claim. A company in this situation needs to be sure that they
have the required expertise on their side to be able to submit a
claim report such that their full entitlement is achieved.
The in-house expertise at the clients disposal includes: former

loss adjusters; forensic accountants; surveyors. Most have
worked for insurers in the recent past. This gives the team an
invaluable insight into how the claim process works, what
information will be required and, most importantly, how to
achieve a full and fair settlement.
The FACS team provides clients with a complete claim

preparation and management service, from initial advice on
policy cover through to negotiation on final numbers.
The core service offered by the team is to prepare and manage

the Property and/or business interruption (BI) claim to the
maximum benefit of the client.
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Often a client will see the prompt settlement of a claim, perhaps without repair or
reinstatement taking place, as the key goal to be achieved. We seek to drive the process
such that the clients specific aims are met. The following gives an indication of just a few
of the issues we can address to the benefit of the client:
Evaluate the most beneficial method of settlement in accordance with the current
business needs and coverage in place
Project manage the requests for information from insurers and direction of the claim
process (programmes, milestones etc)
Carry out cost-benefit analysis to consider viability of accelerating the repair period
Maximise the full potential of the Extra Expenses cover
Model various scenarios using financial data to establish the potential BI losses to date
and going forward
Delivery of supporting information to ensure early release of interim payments.
Benefits
Unless a companys claims process is set up on a sound basis from the outset and, most
importantly, managed effectively throughout, then problems are bound to be
encountered. These can take many forms, from delayed interim/final payment or conflict
over the true entitlement under the policy. The result is damage to cash flow and a
compromised recovery of the business. Clients appointing Marsh Risk Consultings FACS
team remove such difficulties at a time of crisis, and can typically expect to see a greatly
expedited settlement. The client can be assured that someone with a real insight into the
claim process is acting for them and ensuring their best interests are addressed.
As well as the obvious savings in management time, which allows the client to concentrate on
restoration of the business, the cost of involving the FACS team may be reimbursable under
the insurance policy depending on the coverage in place.
Working with Marsh RISK CONSULTING

Marsh Risk Consulting is uniquely positioned to be able to provide a seamless service to
clients. Unlike other public assessors and professional advisers, Marsh Risk Consulting
typically approaches the claim with an already implicit understanding of the clients business,
which we have developed from servicing it day-to-day. This strength is coupled with skills,
understanding and access to the insurance market.
Our clients have the reassurance of knowing that Marsh Risk Consulting will:
Engage highly specialised and committed professionals with an experience of both
sides of the claims process
Focus on what is important to the client and ensure this is properly considered by
insurers and their representatives during the claim life
Ensure the maximum recovery possible under the policy
Case study when a claim

worked
A logistics company in the food and
drink sector had a large distribution
centre and head office near to the
Buncefield explosion. Immediately
following the explosion, Marsh Risk
Consulting contacted the client, both
at its UK operation and at its global
US base. Within 48 hours we had
presented our approach to managing
their claim and had been appointed
to project manage the entire process,
including the preparation,
submission and negotiation of the
buildings, contents, stock and
business interruption claims.
The client had a significant
dependence on a key global client of
its own, and was keen to ensure that
they were kept updated on the
progress of the recovery of the
business. Marsh Risk Consulting was
able to ensure that the clients claim
strategy was aligned with how it saw
its business being reinstated going
forward. As a result, we negotiated
the building claim on an actual cash
value basis and by projecting forward
the full anticipated reinstatement
period of 24 months, we were able to
successfully agree a settlement within
nine months of the explosion
occurring.
In the event of a major or catastrophic
loss, FACS can be contacted through
our 24 hour helpline:- 0845 604
8588.
Neil Greaves
Leader of FACS, UK
+44 (0)207 357 3887
[email protected]
Ian Macdougall
Senior Consultant
+44 (0)141 304 4388
[email protected]
The information contained herein is based on sources we believe reliable and should
be understood to be general risk management and insurance information only. The
information is not intended to be taken as advice with respect to any individual
situation and cannot be relied upon as such.
In the United Kingdom, Marsh Ltd. is authorised and regulated by the Financial
Services Authority for insurance mediation activities only.
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Sustainability
the changing climate of risk
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ff Foreword............................................................. 1
ff Introduction........................................................ 2
ff Assessing the risks and planning for the future...... 3
ff Predicting change............................................... 5
ff Managing the changing risk................................ 6
ff It never rains, but it pours.................................... 8
ff Whose responsibility?......................................... 9
ff Balancing risk and opportunity............................ 9
ff How Marsh can help.......................................... 11
ff About Marsh...................................................... 13
i Sustainability The Changing Climate of Risk
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foreword
For many, climate change is seen to be an issue for the future. But
the simple fact is, our climate is already changing. Accurate longterm scientific measurements of the Earth and the atmosphere
indicate that there has been a steady rise in global average
temperature, an increased incidence of severe storms and
droughts, and sea levels are slowly rising.
While the scale and scope of the impacts of climatic change on society may be
uncertain, direct impacts are more obvious. These include physical damage to
property, failure of infrastructure and an increased likelihood of interruption in the
supply of essential resources and services. There are also major implications of
changes in the climate with regard to where we live, what we make and how we
make them. Adapting our way of life and our businesses to take account of the
changing climate is not being widely considered, yet a business-as-usual approach
is increasingly untenable.
As always, where there is risk there is opportunity. Now is the time to assess the
risks, not just in terms of what it means to our own existence but also what it means
for others, and to seek out the opportunities to be secured from pursuing a more
sustainable agenda.
We intend this paper to be a catalyst for discussion around the risk issues raised by a
changing climate. But more than that, we hope it acts as a guide to executives on how
they can make their business more sustainable, highlighting the benefits derived from
such actions. There are, of course, risks and costs in adopting a more sustainable
approach. Soon, the risks in choosing to do nothing may be much greater.
David Batchelor
CEO, Marsh, Europe, Middle East and Africa
Spring 2011
Marsh 1
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Introduction
The climate is changing and no company is immune from the consequences. The
Global Risks Report 2011, published by the World Economic Forum, lists several
threats created by changes in the climate which may occur within the decade, or
which have the potential to cause global economic impacts of greater than USD10
billion. These risks include more frequent and more severe storms; more
prolonged droughts and a creep in the growth of deserts;
increasing water scarcity and a greater prevalence of inland and
coastal flooding. These categories of risk in turn may lead to
additional disruptive impacts with more people being made
homeless and social infrastructure assets, including critical IT,
power and transport routes, being either damaged or rendered
non-functional.
The scientific evidence is

now overwhelming: climate
change presents very serious
global risks, and it demands
an urgent global response.
Businesses operating in certain geographical locations may have

already experienced what will be in store for many of us as a result
of increasingly volatile weather patterns. The 2003 heat wave, for
The Stern Review: The Economics of
example, which was experienced across much of Europe resulted
Climate Change, October 2006
in an estimated increase in mortality of approximately 40,000
people1 and seriously damaged the production of agricultural
crops. In 2007, Windstorm Kyrill caused an estimated EUR3 billion trail of physical
destruction, stretching from Britain to Poland, and more recently, the estimate of
insured losses from the severe flooding in Australia is estimated to be in excess of
USD6 billion. These types of extreme weather events are likely to become a more
regular feature as global average annual temperatures continue to rise.
Given evidence that the climate is changing, businesses need to consider the
measures that they should be taking to adapt to the increasingly volatile
environment. For instance, if factories and warehouses are seen to be at an
increased risk of flooding, or if offices are located in an area which is more prone
to storms, then consideration should be made for taking appropriate steps to
protect or strengthen the critical assets of the business. Alternatively, it may be
considered that the highest impacts of a severe weather event would be on
producers and suppliers to the business, with the potential for supply chain
disruption. With the advent of just-in-time inventory control, any disruption to
the supply chain could cause significant impacts on the continuity of the
business. If particular property assets or suppliers are considered to be highly
vulnerable to flooding or severe weather, then perhaps relocating to a safer
place or finding a new supplier may be considered to be the best risk
management approach, and the cheapest option in the longer term.
1 Earth Policy Institute: http://www.earthpolicy.org
2 Sustainability The Changing Climate of Risk
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Assessing the risks and planning for the future

Of course a Chief Executive or Risk Manager may question or be questioned as to why their company should spend time
and resources on assessing the possible impacts of climate change on their business, when the phenomenon may not
reach peak impact for many years or even decades to come.
The fact is that the climate is already changing. The ten hottest years on record have all occurred since 1997; sea levels are
measurably rising and Northern Europe has been experiencing higher rainfall, and Southern Europe and Southern Africa
lower rainfall than in the past. Measured changes in the climate have already affected the way that a number of businesses
manage risks and is set to have even more profound consequences on the way that many other companies will operate in
future. For example, the costs of the floods in the UK in 2007 were estimated to have been around GBP3 billion, while in 25
years time it is predicted that flood damage will cost the UK economy around GBP10 billion every year2. Whilst this estimate of
the scale of damage likely to be a regular occurrence indicates a rising trend, the largest level of insured losses in any one year
will probably be much higher. For example, insured losses of the order of USD110 billion were incurred after Hurricanes
Katrina, Wilma and Rita struck America, with Hurricane Katrina alone claiming over 1,800 lives and resulting in property losses
of over USD70 billion. Recently, the frequent floods and severe storms have given credence to predictions that these types of
phenomena will become more frequent and still more severe in the future.
2 CBI, Future Proof: Preparing your business for a changing climate, 2009
Marsh 3
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Predicting change
Despite recent controversies, scientists appear to agree on
how the climate will be changing over the next couple of
decades and there is improved consensus regarding what
this change is likely to infer for society. To face the
comprehensive challenges created by climate change,
businesses need to understand clearly the potential effects
that changes in the climate could have upon their
businesses. A recent major survey of British businesses
carried out for the UK Government3 found that few
companies had started to prepare for the effects of climate
change, even though most agreed that they were
concerned about the potential impact on their business.
Understanding how exposed a business could be to severe
weather events, drought or flood will be the first step in
assessing what effect climate change is likely to have and the
Confederation of British Industry recommends gathering
evidence on the impacts of severe weather events in the past
as an indicator of how more frequent and more severe storms
or floods could affect business operations in the future. The
problems created by an absence of a coherent national
response to natural disaster were graphically illustrated by the
severe flooding across England in 2007. The physical effects
of experiencing the wettest summer on British record were
compounded by the greatest loss of essential services since
World War II. This was reportedly due to a lack of adequate
emergency response planning, a failure to protect critical
infrastructure such as water pumping stations and electricity
sub-stations against flooding, and confusion around
responsibilities for maintaining an adequate network of storm
water drainage. The resulting economic damage totalled over
GBP3 billion4, with the non-economic losses such as effects on
the environment, quality of life and morale being
immeasurable. It was not considered surprising therefore that
adverse weather events was seen to be the top source of
disruption in a survey of resilience managers by the Business
Continuity Institute (BCI)5 and in the UK, Project Watermark6
was initiated in March 2011 to test the emergency response
plans of government departments, emergency services,
councils and volunteer organisations to severe flooding
events, on the understanding that climate change will
increase the likelihood of flooding in the future; we cant
prevent it but we can prepare for it.
For these reasons, climate change should be amongst the top

considerations companies will need to take into account when
making long-term capital investment decisions. The risks
associated with the non-delivery of a particular projects
expected return may be different than first thought if the
chosen site is found to be vulnerable to rising sea levels,
extreme drought, flooding or severe storms. Investors will
therefore need to take into account environmental
considerations in their decision making and demonstrate that
long-term investment projects are both environmentally
friendly and climate proof. Insurers are also requiring an
increased scope of maximum probable loss modelling for
long-term investment projects, such as renewable energy
projects, which are proposed to be located in areas with
higher natural catastrophe exposures. Initiatives are in hand
to develop tools for assessing climate risks. For example, there
are the enhancements of the Equator Principles7 to include
performance and risk management criteria for the control of
greenhouse gas emissions, within the environmental
parameters for consideration prior to making investment
decisions on large-scale projects.
Some companies may ultimately find that some of their
investment plans are higher risk than originally perceived and
long-term projects may become increasingly uninsurable or
cost prohibitive, products unsellable, and specific processes
and supply chains non-viable. These considerations impact
upon the way that investments in businesses and selected
asset classes are made, and Mercer has undertaken research8
to show that up to 10% of investment portfolio risk may be
derived from climate change over the next twenty years.
Mercer states that climate change will have a broad-ranging
impact on economies and financial markets over the coming
decades, and that traditional approaches to modelling
strategic asset allocation will fail to take into account the risks
associated with climate change. In addition, Mercer considers
that to manage the climate change risks, institutional
investors need to think about diversification across sources of
risk rather than across traditional asset classes, and that
investors should take steps to improve the resilience of their
portfolios to climate-related risks. Companies should
therefore take actions to understand the risks that their
businesses face in the light of the predicted changes in the
climate, before the full effects are felt because by then the
risks to the business may be too large to manage.
3 http://ww2.defra.gov.uk/news/2010/08/04/uk-businesses-climate-change/
4 http://publications.environment-agency.gov.uk/pdf/SCHO1109BRJA-e-e.pdf
5 Supply Chain Resilience 2010, 2nd Annual Survey 2010
6 http://www.exercisewatermark.co.uk
7 The Equator Principles (EPs) are a voluntary set of standards for determining, assessing and managing social and environmental risk in project financing.
8 Climate Change Scenarios Implications for Strategic Asset Allocation, February 2011 http://www.mercer.com/climatechange
Marsh 5
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Managing the
changing risk
Careful review of the threats to business from the changing
climate, and the associated potential impacts and costs, will
enable companies to assess their vulnerability and the
effectiveness and longevity of their risk management
procedures. Such an analysis will enable companies to compare
the scale and likelihood of potential threats from climate change
alongside the other corporate risks that they face.
Specifics on the potential impacts of climate change
should be debated in the boardroom, so that directors can
be aware of where climate change-related risks will appear
on the list of the companys biggest risks. The
development of an enterprise risk management approach,
where companies consider the particular loss events and
circumstances which pose the greatest risk to business
objectives, will allow the business to assess the risks from
climate change in terms of the likelihood of potential
impact events and to consider the appropriate responses
through continuous monitoring of risks and development
of appropriate risk management processes. Only with the
enterprise-wide risk information can the board decide
what the corporate appetite is for these types of risk and
progress to agree on how to adapt the business to be
resilient to a more volatile climate, as well as steps needed
to reduce emissions and mitigate the risks.
With the issue of climate change rising up the political
agenda, environmental performance has come into sharp
focus from a regulatory standpoint. For example, in May 2010
the Peoples Bank of China and the China Banking and
Regulatory Commission jointly issued a statement instructing
commercial banks to stop lending to businesses with oldfashioned production facilities that consume large amounts of
energy and emit large amounts of greenhouse gas.
However, no matter how well a company is able to reduce its
own risks from climate change, there is a wider question mark
over the resilience of the business to climate change with
regards to its supply chain, transport and critical infrastructure.
Across Europe the infrastructure on which we rely to transport
people, raw materials and goods, to power factories, offices and
homes and to supply water is aged and will come under
increasing strain from bouts of severe and extreme weather.
Ignoring the issue of climate change will have a
significant economic cost. As the Stern Review noted, the
actions required to cope with a 2C global average
temperature increase could incur a cost of around 1% of
global gross domestic product (GDP) each year by 2050
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which Stern considered significant but manageable. But
the longer we delay tackling the issue of climate change,
the higher the costs will be. This applies to business; by
investing now to adapt to climate change and to reduce
emissions, companies will be effectively investing to avoid
potentially higher costs of doing so in the future.
Global greenhouse gas emissions continue to rise, with both
developed and developing economies continuing to
consume enormous quantities of fossil fuels as their appetite
for energy and transport grow. If action is not taken to curb
the levels of greenhouse gases in the atmosphere, the Earths
atmosphere may be set to warm by much more than 2C.
Should greenhouse gas emissions continue to grow at the
current rate, average global temperatures could rise by
more than 2C within a 50-year horizon. Putting this into
context, the Earths temperature has risen by less than 1C
since 1900. A generally warmer climate will impact the
environment, water availability patterns, food supplies and
therefore human health. A 2C global average temperature
rise may result in as many as 30% of the worlds indigenous
species becoming extinct.
The extent of efforts made to mitigate emissions of
greenhouse gases over the next 10 to 20 years will have a
significant effect on our ability to limit the scale of climate
change in the second half of this century and beyond. The
less mitigation we do now, the more difficult it will be to
adapt to a more volatile climate in the future.
Improving energy efficiency will not only reduce the
impact of the business on the environment but could also
improve a companys bottom line. Yet fewer than one in
two companies have taken steps to do so, according to an
Economist Intelligence Unit report9. Even fewer around
one in three have done anything to lower the carbon
footprint of their existing products and services. With the
cost of fuel, power, water and waste disposal already high
and set to increase further, those companies that tightly
control their use of resources and energy are set to
benefit, with lower costs likely to make for leaner and
more profitable businesses, whilst also allowing them to
be better positioned to take advantage of the associated
opportunities that could arise.
Companies are under growing pressure to change their
processes or cease them altogether and to invest in
more energy efficient, clean technology and renewable
energy sources to cut carbon emissions.
The fact is businesses are already operating in an

economy where greenhouse gas emissions are not
simply being monitored but increasingly need to be
curbed. The UK Climate Change Act specifies that by 2050,
the countrys carbon emissions should be 80% less than the
level that was recorded and reported in 1990. The European
Union (EU) wants emissions to be cut by 20% from 1990
levels by 2020, and there is growing pressure for the target to
be a 30% reduction. The EUs Emissions Trading
Scheme, which caps the emissions of particular industries,
will be extended to airlines in 2012 and to petrochemicals,
ammonia and aluminium industries in 2013. The UK has its
own cap and trade scheme to make public and private
organisations manage their carbon emissions. In certain
states in the USA, there are also now specific requirements
to progressively reduce greenhouse gas emissions from
industry and to report on the strategy for dealing with the
issues of climate change mitigation.
Rising energy prices, caused by growing volatility in the
supply market has sparked a realisation among policymakers
and consumers alike that an ever-increasing global demand
for fast-diminishing stocks of fossil fuel is unsustainable. The
energy industry is a prime example of a business sector that
has adopted a culture of change in order to respond to the
issues of climate change. With conflicting demands from
customers for reasonably priced power with low emissions,
many power companies have responded to pressure from
governments, investors and customers alike to be cleaner,
leaner, environmentally responsible companies. The sectors
multilateral efforts to mitigate climate change through
emission reduction programmes have also created enormous
opportunities for forwardthinking energy companies. The
progressive rise in interest for large scale and long-term
investment in carbon capture and storage is a good example
of where such opportunities for investment exist.
Many countries are looking to renewable energy to replace
aged fossil fuel power stations, additionally offering a measure
of security regarding the quantity and source of a good part of
the electricity they will need to fuel economic growth without
significantly further damage to the environment. Although
renewable energy is still developing, government initiatives to
improve investment in the sector have meant technology has
been improving rapidly. Although they are still some way from
being on a pricing par with fossil fuels, renewable energy
sources are moving swiftly towards offering a genuine
alternative to high emission counterparts.
9 After Copenhagen: Business and climate change
Marsh 7
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It never
rains, but
it pours
Businesses should also anticipate needing to do much more in the future to monitor and limit their
use of water as it becomes scarcer in specific geographical locations. The growing demand for water,
from both businesses and communities, means that by 2030 the requirements for water may outstrip
readily available supply by as much as 40%. According to the World Economic Forum we are now on
the verge of water bankruptcy in many places with no way of paying the debt back and the
consequences for regional economic and political stability will be serious.10 This issue will present
increasing problems for water-intensive businesses such as those in the power, mining, food and
beverage and semi-conductor industries. A sign of the growing concern is that the Carbon Disclosure
Project (CDP) has requested information from over 300 of the worlds largest companies on their
water consumption, including details of the actions they intend to take to manage their water usage
and the associated risks to their businesses from a major disruption in their water supply.
Businesses water use is likely to become an increasingly sensitive issue. Governments might even
step in to limit the amount of water that can be used by companies, just as they have moved to cap
greenhouse gas emissions, and in Saudi Arabia, for example, water is now more expensive than oil.
The water issue is two-fold: water consumption, and the further contamination of depleted water
resources. Companies will likely risk a backlash from regulators, investors,
customers and the general public if their processes are found to
have been overusing or polluting precious
water resources.
10 World Economic Forum Water Initiative: Managing Our Future Water Needs for Agriculture, Industry, Human Health and the Environment, 2008
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Whose
responsibility?
As evidence of a changing climate materialises, so the rules
of the game are starting to change. Companies that fail to
appreciate the implications of this are likely to suffer serious
consequences. For example, investors already want to
know whether the businesses in which they invest have
sustainable business models for an uncertain future, whilst
customers want to be reassured of the ethical conduct of
those who make the goods they purchase. Policymakers
and regulators are more determined than ever to ensure
that companies act within the letter of increasingly
restrictive environmental laws. Over half of UK people
believe businesses have a large influence in limiting climate
change, with concern for the environment the top issue
that they thought companies should be paying attention to
in the near future, according to a major survey conducted
by Ipsos Mori11. The vast majority of people said they also
thought companies should make it easy for them to buy
environmentally friendly products.
Many climate litigation cases are being heard in courts
across the US. These include Comer v Murphy Oil, in which
victims of Hurricane Katrina seek compensation from over
100 named oil and coal companies for contributing to
global warming, which they argue intensified the storm,
devastating their homes and property. The inhabitants of
Kivalina in Alaska are suing a number of oil, energy and coal
producers, with the villagers claiming that these companies
are responsible for Kivalina having to be abandoned due to
the rising sea levels. In Connecticut v American Electric
Power Company, the attorney generals of eight states and
the City of New York have filed a lawsuit against six
electricity generating companies claiming their greenhouse
gas emissions contribute to global warming, which
constitutes a public nuisance.
The development of more sophisticated climate change
monitoring and modelling tools will, campaigners believe,
make it possible to attribute extreme weather events to a
trend associated with climate change and therefore to
those companies deemed to be most responsible for
causing the average annual temperatures to rise. Over
2,500 organisations from around the world now provide the
Carbon Disclosure Project with details of the estimated size
of their carbon footprints and the efforts that they are
making in order to reduce it. More than 500 institutional
investors with combined assets of over USD64 trillion under
management have openly shown their concern regarding

the potential environmental risks in their portfolios and
support the work of the CDP. The project now lists those
companies it believes to be leaders in their environmental
efforts, with the highest corporate performers setting
emissions reductions plans and demonstrating a
commitment to it in their strategy, governance and
stakeholder communications. The CDP also now names
those companies in each of its key sectors that fail to
disclose to it information on their impacts and emissions.
As the Stern review notes, taking decisive steps to reduce
greenhouse gas emissions or mitigation must be viewed
by businesses as an investment, not a cost. Companies
should be willing to pay the price now and over the coming
years in order to prevent the predicted severe
consequences in the future that will bring even higher
costs. If investments in emission reduction and energy
efficiency are made wisely, costs should be manageable.
Furthermore, there will be plenty of opportunities for
growth and development along the way.
Balancing risk and

opportunity
Just as companies are threatened by the consequences of
climate change, so there are sectors and businesses which
will benefit from it. For example, buildings are responsible
for some 40% of carbon emissions in Europe and, in most
developed countries of the world, property forms the
largest single emission source, according to BRE Group12.
However, the building industry is likely to experience
increased business opportunities from the retrofitting of
existing buildings to meet new environmental standards
and through the construction of new green buildings.
They are also likely to be required to respond to new
regulations requiring environmentally friendly building
methods and tougher codes to ensure buildings can
withstand intense storms. It is clear, therefore that climate
change is creating opportunities for innovation and as a
consequence, resulting in winners as well as losers. By
actively looking at ways to manage their own risks
associated with climate change, companies will enjoy
opportunities to assist others to reduce the threats inferred
by operating in a more volatile climate.
11 http://www.ipsos-mori.com/DownloadPublication/1174_sri_tipping_point_or_turning_point_climate_change.pdf, 2007
12 The Forty Per Cent Symposium, BRE Group, 2011
Marsh 9
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How Marsh can help

As the worlds leading strategic risk adviser and insurance
broker, Marsh helps its clients to identify, assess and manage
risks arising from changing business processes and
undertaking specific projects to establish a response to climate
change. We draw on the expertise and deep insights of
colleagues from across the global network to evaluate and
manage the threats and to harvest opportunities. Our
experience comes from working with clients in assessing and
managing their property, infrastructure, investment and
operational risks, and from the work we have carried out within
the specialist areas of natural catastrophe modelling,
renewable energy, carbon capture and storage, clean
technology, green buildings, and emissions reduction projects.
Our areas of expertise include:
Business continuity and crisis management We provide
business continuity and crisis management consulting
services to meet the evolving needs of businesses. Using
our industry-leading and award-winning expertise we offer
services in emergency response, business continuity and
risk management, crisis management, technology and
communications which transcends traditional business
recovery planning. Our approach includes four primary
areas pre-event response and recovery strategies, realtime incident support, and post-event business and
operational recovery planning.
Business interruption We help with the development of a
globally consistent process and for the standardisation of value
collection to assess the risk of business interruption (BI). Marsh
Risk Consulting combines the unique skills of their property
risk consulting, forensic accounting and claims services (FACS)
and business continuity management team to quantify
business interruption losses and the potential impact on
businesses. Our approach combines pre-loss preparation, as
well as post-loss claim support and preparation.
Natural catastrophe risk management Marshs Property
Practice and Marsh Risk Consulting combine to provide
natural catastrophe (NAT CAT) location exposure
assessments using the Natural Hazard Assessment Network
(NATHAN) database13. This service forms part of our NAT CAT
pack including detailed modelling, specialist placement,
catastrophe response planning and claims management.
These services provide risk management advice to clients
with a significant natural catastrophe insurance premium
spend, claims history or exposure, including review of supply
chain risks and the associated risks to the environment.
Property sustainability We provide services to inform

clients of the environmental performance of existing
buildings and environmental performance enhancement
measures. This encourages enhanced risk transfer through
inclusion of property sustainability clauses in insurance
policies. The inclusion of energy performance and
sustainable buildings, and resilient repairs property policy
extensions will ensure rebuilding in an environmental
friendly and robust manner post loss.
Environmental services We provide consulting and
advisory services designed to help businesses assess and
manage key risks associated with potential impacts to the
environment. Combining strategic environmental
consulting and environmental insurance brokerage services
provides the guidance necessary to navigate through the
statutory and operational environmental risks that can
affect business operations.
Supply chain risk management Marsh Risk Consulting
offers solutions tailored to an organisations unique supply
chain risk management needs. This can include supplier risk
viability, supply chain risk diagnostic and supply chain risk
surveillance. Our advice will provide an end-to-end view of
supply chain resilience, identifying demand, supplier and
operational risks, and the financial impacts of supply chain
failures. Our approach to supply chain risk management
doesnt stop there, as once the risks have been assessed and
quantified, we can provide the essential link to non-damage
BI and supply chain risk transfer solutions.
Renewable energy Marshs Renewable Power and Clean
Technology team focuses on providing project risk advisory,
consultancy and transactional insurance solutions for
power generating companies which primarily use
sustainable natural resources, such as solar, wind, tidal,
wave, geothermal, biomass and biofuel. The team is also
focused on risk management for projects involving low
carbon power generation technologies, where companies
are seeking support to transition from hydrocarbon to low
carbon technology, i.e. carbon capture and sequestration.
The team works with power and utilities companies,
independent power producers, financial institutions and
their technical advisers and consultants to provide
comprehensive project risk advice on risk and insurance in
the renewable energy and clean technology sectors.
13 Munich Re GeoSpatial Solutions Natural Hazards Risks Database
Marsh 11
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About Marsh
Marsh, the worlds leading insurance broker and risk adviser, teams with its clients to define, design, and deliver innovative
industry-specific solutions that help them protect their future and thrive. It has over 24,000 colleagues who collaborate to
provide advice and transactional capabilities to clients in over 100 countries. Marsh is a member of Marsh & McLennan
Companies, a global professional services firm with 51,000 employees worldwide and annual revenue exceeding USD10
billion, which is also the parent company of Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of HR
and related financial advice and services; and Oliver Wyman, the management consultancy.
Marsh 13
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For further information, please contact your local Marsh office

or visit our web site at: marsh.com
Marsh is a member of ClimateWise, the global insurance industrys leadership group to drive action on climate change risk.
ClimateWise members believe that putting climate change risk at the heart of the business strategy, with company board approval and
engagement, will deliver tangible benefits for the industry and beyond. Through collaboration, annual public reporting, and by
working openly with policy-makers, scientific communities and civil society, ClimateWise members work towards a common goal: to
reduce the risks faced by their businesses, customers and wider society caused by the effects of climate change.
ClimateWise was launched by The Prince of Wales in 2007, and is facilitated by the University of Cambridge Programme for
Sustainability Leadership.
Marsh is a founding partner of base (Business and a Sustainable Environment), an organisation with a focus on
public/private sector collaboration in respect of making business sustainable and ensuring sustainability
best practice is effectively disseminated throughout the community.
The information contained herein is based on sources we believe

reliable and should be understood to be general risk
management and insurance information only. The
information is not intended to be taken as advice with
respect to any individual situation and cannot be
relied upon as such.
Marsh Ltd. is authorised and regulated by
the Financial Services Authority for
All rights reserved
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EMEA Property Practice
Property Sustainability
Green Buildings
Sustainability is a growing
consideration for many property
owners and property managers. In
relation to property, the aspects of
sustainability that require careful
consideration include adaptation to the
changing climate, promoting energy
efficiency, reducing direct greenhouse
gas emissions, and minimising the
impacts on the environment.
a service offering environmental assessments in

conjunction with BRE Global; and
Buildings are responsible for 40 percent of global carbon

emissions in Europe and, in most developed countries in
the world, form the largest single emission source
according to BRE Group1. With an increase in the demands
for transparency around the environmental performance of
buildings, property sustainability has become a key feature
in the drive for sustainable performance.
green building clauses and
At first glance, it might be difficult to understand how

property damage insurance could help you to achieve
those objectives. From a property perspective, Marshs
approach in support of clients sustainability goals includes:
promoting the inclusion of property sustainability
clauses in property damage policiesnamely green
building and resilient repairs clauses;
The Forty Per Cent Symposium, BRE Group, 2011
provision of environmental impairment liability

insurance to cover operational environmental risks
and liabilities associated with ownership and tenancy.
Clauses
Set out below is a brief explanation of the property
sustainability clauses and a proposed approach and
wording. We deal with the key clauses as follows:
resilient repairs clauses.
Green Building
The green building clause allows reinstatement of
property after a major loss to be completed in an
environmentally friendly manner, with any additional
cost being paid by insurers. In relation to the property
damage policy, an extract from an example green
building clause would be as follows:
Energy Performance and Sustainable Buildings Extension
This insurance extends to include the reasonable additional cost of
reinstatement incurred with the consent of the insurers to make the
following improvements during the reinstatement, repair or
replacement of the Property Insured following Damage:
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a) ecological, environmental and sustainable improvements of the

type being incorporated in new buildings of similar use and value
within the same territory, including improvements made in
accordance with the BRE Environmental Assessment Method
(BREEAM) for the construction of buildings
b) improvements to comply with recommendations made under the
current Energy Performance Certificate (or local equivalent) for the
Property Insured
The impact of green reinstatement on the period of loss

must also be considered for business interruption
purposes. Either a separate clause should be included
under that section of the policy; as a minimum the wording
can be included under the main clause, for example
including:
the (additional) time necessary for rebuild in a manner that aims to
minimise potential harm to the environment utilising latest available
technology and to certify or recertify the buildings following an insured
loss.
Resilient Repairs
Marsh has been working with clients and insurers for the
introduction of these clauses in policies. Feedback has
been positive and we have been successful in including
the clauses in some cases. However, there are various
versions available2, they are not yet commonplace and
there is limited information available in relation to the true
costs and actual claims. We have, therefore, developed a
service to provide more information upfront in the process
to help both clients in their risk management decisions,
and insurers in their assessment of risk. Our environmental
assessment is explained further below.
Environmental Assessment
Through our Property Risk Consultants, we currently
provide advice to our clients on the prevention of incidents
and resilience improvements. In relation to green building
clauses, we understand that insurers would be reluctant to
include such clauses without knowing the consequences.
We will therefore be offering an environmental assessment
as an additional part of our property surveys.
Resilient Repairs Extension
We have consultants licensed as BREEAM (BRE

Environmental Assessment Method) international
assessors. On request, the Property Risk Consultants will
carry out property environmental assessments allowing
clients to gather information on their existing footprint
and how this might be improved. An environmental
assessment will also provide the information needed for
insurance placement. Insurers will have more information
on existing buildings and will be able to establish the
estimated additional cost to replace or repair a building in
an environmentally friendly manner. Furthermore, we can
add a basic green building risk assessment to our risk
information reports.
This insurance extends to include the reasonable additional cost of

reinstatement incurred with the consent of the insurers to make
Resilient Repairs during the reinstatement, repair or replacement of
the Property Insured following Damage.
Environmental Risk and

Liability Management
For the purposes of this extension, Resilient Repairs shall mean

improvements intended to mitigate and if possible prevent a
recurrence of the same insured peril, including but not limited to the
type of materials used in the reinstatement of the Property Insured,
and the design and construction of the building and its internal and
external fixtures and fittings.
Our Environmental Practice offers services in respect to

the review of environmental risks and liabilities
associated with single properties or portfolios of
properties under management. With quality
environmental information available on the properties
under management, we help clients with the placement
The resilient repairs clause encourages the replacement

or repair of assets in a way that helps prevent future
incidents, thereby minimising business interruption, and
also reducing the impact on the environment of
manufacturing replacement materials. There is also a
reduction in claims and related costs for insurersa clear
win-win situation.
An extract from an example clause is set out below:
The wording examples provided above have not been fully accepted by insurers
3 Property Sustainability
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of site-specific pollution legal liability insurance, to

cover both historic pollution conditions and any new
pollution conditions or environmental damage which
may be caused. Environmental insurance can be
structured to provide cover for the new environmental
liabilities, such as those imposed by the EU
Environmental Liability Directive, and to cope with
automatic cover for new acquisitions and daughter
policies for divested properties. Particular attention will
be taken of the fact that routine and emergency
maintenance will need to be undertaken at specific
properties from time-to-time, and that this should not
be considered as re-development or a material
change of use. An environmental insurance policy can
be structured to allow new sites to be included within
the policy at a defined additional premium based on
property type and business activity.
BRE
BRE was originally the Building Research Station and later the Building Research
Establishment. But since then the work of BRE has, for many years, extended beyond
just buildings. Because it undertakes testing and consultancy as well as just research
and because it is no longer a Government Establishment (it became a private company
in 1997), the group is now known as BRE.
BRE Global is an independent, third-party approvals organisation, offering certification of
products, services and systems to an international market. Its testing and approvals are
carried out by recognised experts in world class facilities. BRE Global also offers cuttingedge research and consultancy services.
We are pleased to be working with Marsh and the insurance community in relation to both the
environmental assessments and the inclusion of such clauses in insurance policies. As individuals or
as businesses, we all have responsibility for our environment, and this is an example of businesses
working together to achieve common sustainability goals. We have performed extensive research into
environmentally friendly design, use of materials and efficiency. We are very encouraged to see that
this information is being used to everyones advantage, as being green is also great for business.
Martin Townsend - Director of BREEAM, BRE Global
Marsh 4
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Benefits to Clients
Information on existing buildings and environmental improvement
recommendations
Environmental rating from BREEAM
Improved risk transfer position in terms of information for insurers and the
inclusion of property sustainability clauses in policies
In the event of a loss of a building, the ability to rebuild in an
environmentally friendly (and more robust) way at little or no extra cost to
your organisation
contact
For more information,
please contact your local
Marsh representative or:
Incorporate green building objectives into your sustainability proposition

and engage with our Environmental Practice
Caroline Woolley
[email protected]
Tel: +44 (0)20 7357 2777
Further Reading
Ron DeBruijn
EMEA Property Risk Consulting Leader
[email protected]
Tel: +3 1 10 406-0394
Sustainability managing your risk
Cliff Warman
EMEA Environmental Practice Leader
[email protected]
Tel: +44 (0)20 7357 2200
Sustainability the changing climate of risk

Frank Engelhardt
EMEA Property Practice Deputy
Marsh
[email protected]
Tel: +45 459 595 28
EMEA Property Practice
PROPERTY SUSTAINABILITY
SuStainability
managing your riSk
SuStainability
the changing climate of riSk

Julie Speed
Business Development Coordinator,
EMEA Risk Practices
Marsh
[email protected]
Tel: +44 207 357 2608
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CONTACT
Caroline Woolley
Marsh Ltd.
Tower Place East, London EC3R 5BU
Direct: +44 (0) 20 7357 2777
Mobile: +44 (0) 7800 682710
Fax: +44 (0) 20 7929 2705
[email protected]
Ron de Bruijn
Tel: +31 10 4060394
Mobile: +31 622521255
[email protected]
Julie Speed
Business Development Coordinator EMEA Risk Practices
Marsh Ltd.
Tower Place East, London EC3R 5BU
Direct: +44 (0) 20 7357 2608
Mobile: +44 (0) 7900 568833
Fax: +44 (0) 20 7929 2705
[email protected]
Registered in England Number: 1507274, Registered Office:

1 Tower Place West Tower Place London EC3R 5BU
In the United Kingdom, Marsh Ltd. is authorised and regulated by the Financial Services Authority for insurance
mediation activities only.
Marsh Ltd. is a subsidiary of Marsh Inc. Services delivered within each of the markets we operate within will
be subject to local regulatory requirements.
Marsh Ltd conducts its general insurance activities on terms that are set out in the document Our
Business Principles and Practices. This may be viewed on our website
http://www.marsh.co.uk/aboutMarsh/principles.html
Please note that Marsh shall not provide insurance brokerage services or other services
in violation of applicable trade sanctions laws. Therefore, Marsh will not provide
insurance brokerage services or other services to you or in connection with any
activities that could expose Marsh to any sanction, prohibition or restriction
under United Nations resolutions or the trade or economic sanctions,
laws or regulations of the the European Union, United Kingdom,
United States, or other applicable countries.

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The NAT CAT Pack

Natural catastrophe Risk Management

Nat Cat Risk Map

Natural hazards and catastrophe modelling

- Supply chain risk management

After the earthquake: Supply chain resiliency

- Business continuity management

Property Sustainability Green Buildings

Natural catastrophe risk management

NAT CAT Pack

With natural catastrophe (NAT CAT) events increasing in

The NAT CAT Pack is our guide to best practice in risk

The increasing complexity of risks, combined with the

* A PEA provides the zoning information and maximum limits to highlight

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maximum level of detail. This can include your own

2 Natural Catastrophe Risk Management

Environmental impairment study As a separate project

Claims If you suffer loss as a result of a NAT CAT event,

How you CAN benefit

insurers to better manage their capital, allowing for more

Who should buy these services?

Once the worst-case catastrophe exposure is

The information contained herein is based on sources we believe reliable

NAT CAT Risk Map

NAT CAT Risk

* PEA provides the zoning information and maximum

2 Natural Catastrophe Risk Map

On-Map and Email Alerting

Earthquake Zone - Property Values

The workshop may expose risks or

CS STARS LLC, a business unit of Marsh, serves the technology needs of

Natural hazards and

What are natural

The risk posed to a company by natural hazards

The Marsh RISK CONSULTING

Marsh Risk Consulting 1

Great Natural Catastrophes Worldwide

Overall losses (in 2011 values)

Trend overall losses

Insured losses (in 2011 values)

Trend insured losses

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The preliminary examination of your property schedule

Scientifically sound loss expectancies can be developed.

proximity to earthquake faults;

The model draws upon a worldwide database consisting of

Marsh Risk Consulting 3

World map of natural hazards

4 Natural Hazards and Catastrophe Modelling

Marsh Risk Consulting 5

Working with Marsh

The information contained herein is based on sources we believe

Supply chain risk management

In todays global business environment,

Facing an Uncertain Future, 109 UK firms polled in 2009

Marsh Risk Consulting offers an assessment service that, as a

The process is continuous, therefore a

1. Implemented a standardised approach to developing BCPs at each