Quantitative Risk Assessment as a Practical Basis in Energy Insurance. Alexei N. Chernoplekov, Director, Risk Management, Andrew N. Yelokhin, Head of Risk Assessment Department, Alexei V. Lebedev, Head of Risk Management Department, LUKOIL Insurance Company, 44-2, Krasnay Presnya Str., Moscow, 123022, Russia, telephone (+7 095) 969 66 55, fax (+7 095) 929 95 33, e-mail: email@example.com
LUKOIL insurance company, being captive insurer of the major oil company LUKOIL, specializes in energy insurance. Due to the obvious fact that Russian risks are not well known to the international market, this particular insurer permanently faces the problem of substantiation of the concrete figures - such as premiums, de-ductibles, limits of liability, etc., in general energy package insurance. The other problem, quite common for captive insurer, is to find effective leverages to rise profits by managing risks of Client's facilities.
The use of QRA was chosen as a way in solving both problems. In each case, within the framework of an engineering survey, all possible accident and emergency scenarios (approx. tens and hundreds of thousands) are calculated, including estimation of loss value and expected frequency of realization for each scenario. Average value of loss in all accidents for a particular facility, also known as risk, is calculated. Pure statistical data and EML approach gives lower and upper limits of risk correspondingly, allowing the surveyor to check and "keep under control" rather complicated and uncertain QRA results.
Risk for the insurance purposes should be treated as a so-called netto value of premium. The knowledge of risk "anatomy" creates a possibility to designate correctly an assured property according to preliminary prescribed premium amount (quite typical situation for "in transition" economies). On the other hand, if necessary, risk value (premium) can be corrected if only a given part of a property (but not the whole facility) should be covered by an insurance protection (of course, with a corresponding restrictions for initiating events allocation). Deductible appointment and reinsurance premium calculation can be done on the same basis.
The way how the risk is calculated also allows the insurer to find out main risk contributors, to calculate, and thus substantiate the safety improvement program for a particular facility, in other words - the fist of prioritized in their efficiency (risk reduction/cost) measures for this facility, its safety management and emergency response systems. It is considered by LUKOIL insurance company as a basis for risk management program.
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