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Environmental Risk

Severe Weather Imperils Fuel Pipelines

Severe weather incidents are increasing pipeline loss frequency, especially in places where environmental risk was not previously a problem.
By: | April 3, 2017 • 3 min read

April showers bring peril to pipelines.

The hurricane season does not start officially until June 1, but spring rains and snowmelt highlight the growing peril to the aging energy infrastructure in the U.S. from severe weather. In most cases the leaks are small and contained locally, but underwriters see the emerging risk as one of frequency as much as severity.

In late October, the Associated Press reported that a “freak storm” around Williamsport, Pa., “caused a Sunoco Logistics gasoline pipeline to rupture, spilling an estimated 54,600 gallons into a tributary of the Loyalsock Creek that flows into the Susquehanna River at Montoursville.

John O’Brien, energy practice leader, Ironshore

The storm dumped as much as seven inches of rain on Western and Central Pennsylvania, triggering mudslides, turning roads into rivers and sweeping away at least two homes.

“The energy industry has environmental risks because their assets are set in places that have exposed named perils,” said John O’Brien, energy practice leader at underwriters Ironshore.

“These perils are not new. What is new is the greater awareness of weather events. Pipeline losses in particular seem to have greater frequencies. At least they are being reported more frequently and the losses seem to be bigger.”

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O’Brien noted that weather is not the only variable in the equation.

“Part of the perception is that there is more material in storage than ever. Both crude oil and refined products. The tanks and terminals are full. Storage capacity is at an all time high.” When weather comes in, it takes longer to drain tanks, and fewer options on where to put displaced material.

“Pipeline people understand the issues,” said O’Brien. “In the past they mostly focused on system integrity [from an operational and maintenance perspective]. Now issues like ground subsidence are being discussed more and more. There is definitely heightened awareness.”

Marcel Ricciardelli, senior vice president, environmental division, Allied World, corroborated that, “yes, the experts in weather tell us that, yes, we are in a cycle of more, and more severe weather incidents. And that has affected our industry and the industries we cover.”

“When much of the energy infrastructure now in place was installed, that was based on past weather incidents and experience to that time. As a result, today, we are not just seeing more and more severe incidents; we are seeing severity in new regions.”

Marcel Ricciardelli, Senior Vice President, Environmental Division, Allied World

That has led to some underwriters changing the way they run their business from underwriting to capacity deployment.

“The property and casualty guys can give you a thesis on this,” said Ricciardelli. “On the environmental side things are more nuanced. I can tell you some of the things we are starting to look more at are things like above-ground tanks that are below grade, such as in a parking structure.

“We are alert to concentrations of things like that in urban areas. That goes for smaller tanks to larger bulk storage. Overall there are clearly shifting considerations for our industry.”

“One of the best things about environmental coverage is that it includes recovery services.” — Marcel Ricciardelli, senior vice president, environmental division, Allied World

Traditionally property policies do not include much environmental coverage, Ricciardelli explained. “Environmental tends to come in at two spots: a time element within the casualty tower, and also within pollution. For those, the event is not really the issue. The trigger is simply a release.”

After a release from any cause, Ricciardelli added that “the most important thing is access for recovery. If the release was caused by a mudslide from heavy rains, is there flooding? Is the area stable enough to begin recovery? Or was the landslide from seismic activity?

“One of the best things about environmental coverage is that it includes recovery services. Most of the big pipelines have their own, but for smaller operators the access to equipment and expertise is important.”

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Recovery assets and preparation brings Ricciardelli back to the challenge of worse weather in new places. “There are landfills that were sited in places that were considered safe and are now flood zones.”

There are also environmental hazards that are not weather-related. Earthquakes associated with underground injection of wastewater have been a serious concern.

“The attention has been on homes and buildings with cracks,” said Ricciardelli, “but this comes back on the energy industry. There are pipelines and storage terminals in places like Oklahoma that have documented increased seismicity, and those facilities are not built to withstand earthquakes.”

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

In the Fast-Paced World of Retail, This Risk Manager Strives to Mitigate Risks Proactively and Keep Senior Leaders Informed

Janine Kral works to identify and mitigate risks, building strong partnerships with leaders and ensuring they see her as support rather than a blocker. 
By: | October 29, 2018 • 4 min read

R&I: What was your first job?

My very first paid job was working on my uncle’s ranch in British Columbia in the summers. He had cattle, horses and grapes — an unusual combo. But my first real job out of college was as a multi-line claims adjuster at Liberty Mutual.

R&I: How did you come to work in risk management?

Right out of college I applied for a job that turned out to be a claims adjuster at Liberty Mutual. I accepted because they were offering six weeks of training in Southern California, and at the time that sounded really fun. I spent about three years at Liberty Mutual and then I spent a short period of time at a smaller regional insurance company that hired me to start a workers’ compensation claims administration program.

I was hired at Nordstrom as the Washington Region Risk Manager, which was my first job in risk management. When I started at Nordstrom, the risk management department had about five people, and over the years it has grown to about 75. I’ve been vice president for 11 years.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

I would say that technology has probably been the biggest change. When I started many years ago, it was all paper and no RMIS.

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R&I: What risks does the retail industry face that are unique?

We deal with a lot of people — employees and customers. With physical brick and mortar settings, there are the unique exposures with people moving in and out in a public environment. And of course, with ecommerce, we have a lot of customer and employee data, which creates cyber risk — which is not necessarily a unique risk in today’s environment.

R&I: Can you describe your approach to working with senior leaders and front-line staff alike to further risk management initiatives?

It starts with keeping the pulse of what’s happening with the business. Retail moves really fast. In order to identify and mitigate risks proactively, we identify top risk areas and topics, and then we ensure that we have strong partnerships with the leaders responsible for those areas. Trust is critical, ensuring that leaders see us as a support rather than a blocker.

R&I: What role does technology play in your company’s approach to risk management?

Janine Kral, claims adjuster, Nordstrom

We have an internal risk management information system that all of our locations report events into — every type of incident is reported, whether insured or uninsured. Most of these events are managed internally by risk management, and our guidelines require that prevention be analyzed on each one. Having all event data in one system allows us to use the data for trending and also helps us better predict what may happen in the future, and who we need to work with to mitigate risks.

R&I: What advice might you give to students or other aspiring risk managers?

My son is a sophomore in college, and I tell him and his friends all the time not to rule out insurance as a career opportunity. My advice is to cast a wide net and do your homework. Research all the different types of opportunities. Read a lot — articles, industry magazines, LinkedIn. Be proactive and reach out to people you find interesting and ask them about their careers. Don’t be shy and wait for people and opportunities to come to you. Ask questions. Build networks. Be curious and keep an open mind.

R&I: What are your goals for the next five to 10 years of your career?

I have always been passionate about continuous improvement. I want to continue to find ways to add value to my company and to this industry.

R&I: What is your favorite book or movie?

My favorite book is Shantaram by Gregory David Roberts. It’s a true story about a man who was in prison in Australia after being convicted of armed robbery, and he escaped to India. While in India, he passed himself off as a doctor in a slum. It’s a really interesting story, because this is a convicted criminal who ends up helping others. I am not always successful in getting others to read the book because it’s 1,000 pages and definitely a commitment.

R&I: What’s the best restaurant you’ve ever eaten at?

Fiorella’s in Newton, Massachusetts. Great Italian food and a great overall experience.

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R&I: What is your favorite drink?

“Sister Carol.” I have no idea what is in it, and I can only get it at a local bar in Seattle. It’s green but it’s delicious.

R&I: What is the riskiest activity you ever engaged in?

Skydiving. Not tandem and without any sort of communication from the ground. Scary standing on a wing of a plane, but very peaceful once the chute opened, slowly floating down by myself.

R&I: If the world has a modern hero, who is it and why?

I can’t think of one individual person. For me, the real heroes are people who have a positive attitude in the face of adversity. People who are resilient no matter what life brings them.

R&I: What about this work do you find the most fulfilling or rewarding?

It’s rewarding to help solve problems and help people. I am proud of the support that my team provides others. &




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]