CONFIDENTIAL
Zurich Commercial Insurance Middle East
IMIA Working Group Paper 106(18)Construction in Mountainous Regions3rd September 2018Richard Gordon
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 2
IMIA working paper 106(18) Construction in Mountainous regions – Singapore 2018
IMIA Working Paper 106(18) - Construction in Mountainous Regions
The Working Paper
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 3
Agenda
1.0 Introduction of Team Members
2.0 Mountainous Regions – Outline of the Paper
3.0 Types of Projects Considered
4.0 Natural Catastrophe (Nat Cat) Exposures
5.0 Technical Exposures
6.0 Underwriting Considerations
7.0 Claims & Lessons Learnt
8.0 Conclusions
9.0 Questions and Answers
Agenda
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 4
Richard Gordon, Zurich Insurance Company Ltd.
Andrea Belli, Swiss Re Corporate Solutions
Manuel Bezjak, Swiss Re Corporate Solutions
Tatiana Garbelini, CHUBB
Mark Allan, HDI-Global
Mahmood Ahmed, Hamid Mukhtar & Co.
Auditee Dutt, Zurich Insurance Company Ltd.
Heiko Hammacher, Helvetia Versicherungen
Working Group
IMIA EC Sponsor: Guido Benz, Swiss Re Corporate Solutions
IMIA Working Paper 106(18) - Construction in Mountainous Regions
1.0 The Working Group Members
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 6IMIA Working Paper 106(18) - Construction in Mountainous Regions
2.0 Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 7
Development
Research was very extensive during which we evaluated the wide varietyof projects that could be encountered.
The difficult element of this project was not to repeat parts of previousworking groups and only to cover risk types that occur in these specificenvironments. For example it could be said tunneling in mountainousregions may have a lot of common aspects of tunneling in urban areas.
Modest sum insureds in monetary value, however we also came acrosssome ‘Mega’ projects that that may for instance that may run for severalhundred kilometers, crossing several countries.
Soon became apparent that Leisure, recreational risks such as cablecars, viewing galleries, ski stations and associated facilities were quitecommon.
The majority of the projects generally are the Contractors/Erection AllRisk Covers with TPL. Delay in Start up (DSU) and Advance Loss ofProfit (ALOP) were mainly encountered in Hydro schemes.
Lessons learned from Claims examples.
3.0 Types of Project Considered
IMIA Working Paper 106(18) - Construction in Mountainous Regions
Development of the Paper
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 8
3.1 Types of Project Selected
IMIA Working Paper 106(18) - Construction in Mountainous Regions
Ski Stations and Tourist attractions generally incorporating peoplemoving transport systems such as cable cars
Railways – manly for purpose of tourist attractions and viewing points
Power and Mobile Telecom transmission systems
Avalanche protections schemes
Retaining walls and slope protection in mountainous terrain
Hydropower and Dam projects
Utilities and Pipelines installations
Temporary works schemes and use of specialist plant and equipment.
Types of Projects
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL IMIA Working Paper 106(18) - Construction in Mountainous Regions 9
3.2 A typical leisure and recreational type riskGolden Bridge – Iconic Viewing Gallery,Vietnam.
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 10IMIA Working Paper 106(18) - Construction in Mountainous Regions
3.2 One of the steepest railways in the world
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 11
3.3 Trans Adriatic Pipeline Project
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 12
3.4 Lintahl Project in Switzerland
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 13
Nat CatExposure
4.0 Natural Catastrophe Exposures
Respect for the mountains – many risks which are beyond the projectscontrol. Uncertainty and Risk Transfer.
Very challenging terrains in terms of access and servicing. High costs!
Weather conditions - Long term seasonal effects(some projects maybenot accessible for 6 months a year). Much discussed impact of Climatechange and how weather patterns are becoming less predictable.
Limited time to prepare for such events as is the case for most Nat Catevents
Devastating consequences on Humans and physical damage to projects
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 14
4.1 New Zealand – South Island Earthquake
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 15IMIA Working Paper 106(18) - Construction in Mountainous Regions
4.2 Weather – Impact of Snow Working at High altitude
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 16
4.3 Damage From Avalanche
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL
• Type of Outburst Flooding which occurs when water damned by a glacier or moraine is released
• Failure can happen due to erosion and build up of water pressure, an avalanche of rock, earthquake, large portion of Glacier breaks off and displaces water in a glacial lake at base.
• Impact of flooding can be seen in some of the losses in later section.
4.4 Glacial Flooding Outburst Flood (GLOF)
IMIA Working Paper 106(18) - Construction in Mountainous Regions 17
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 18
Technical Challenges
5.0 Technical Challenges
Very good experience in the working group team with the exposures thatare associated with projects in mountainous regions.
Geotechnical and ground conditions are always key and Landslides inparticular are sometimes an issue.
With projects becoming more challenging , experienced contractors andresources to deliver such projects in remote locations.
Interaction with local communities and social/political exposures. Availability of specialist plant is often limited and have to be brought in. Longer durations due to sequential works and restricted access. Existing property in the vicinity of project works Higher costs due to logistics, projects have to be self sufficient. Power,
welfare and accommodation, Concrete batching plants, Installation ofcable cars for personnel and equipment.
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 19
Technical Challenges
5.1 Geotechnical Challenges
Natural causes of landslides include:• groundwater (pore water) pressure change acting to destabilize the
slope• loss or absence of vertical vegetative structure, soil nutrients, and soil
structure (e.g. after a wildfire – a fire in forests lasting for 3–4 days)• erosion of the toe of a slope by rivers or ocean waves• weakening of a slope through saturation by snow melting, glaciers
melting, or heavy rain• erosion of an exposed slope face via natural weather actions• earthquakes adding loads to barely stable slope• earthquake-caused liquefaction destabilizing slopes• volcanic eruptions • non favorable orientation of faults or discontinuities within the soil or rock
mass
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 20
Technical Challenges
5.1 Geotechnical ChallengesLand Slide Risk Mitigation & Management
• Site investigation and survey of area to establish degree of geotechnical and topographical risks that a project will face.
• Where possible, access routes and works areas should be located/ routed, as far as practicable, to avoid areas of higher risk. Risk avoidance is normally preferable to mitigation actions.
• Areas with weak sub surface layers and potential fluctuations of ground water may pose increased risk.
• Once location and routes are finalized, detailed site investigation should be undertaken.
• Evidence of past slope movements should be established. Evidence can be found in vegetation (larger bushes and trees growing in an irregular pattern over longer periods of time); tension cracking on slopes, and slumping of toes of slopes.
• Physical protection measures can also be implemented; these can include Slope stabilization actions this may comprise of a programme of rock bolting, debris/ fall arrest netting, face protection shotcrete, rock scaling, deflection structures; or set aside of sterile/ run off areas for sections that are known to suffer rock falls or avalanche.
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 21
Logistical Challenges
5.2 Logistical Challenges
High cost to install, operate and maintain
Contacted Managing Director of Heliswiss International
Fascinating discussion on how key the use of Helicopters in deliveringprojects in Mountainous regions. Very efficient method for installationwhether its for temporary works such as crane installation or permanentinstallation.
Most common projects are Ski/Lift systems, Power transmission andMining projects. Also now being extensively used on urban schemes.
Limitations – weather, seasons, lift capabilities, logistics, Insurancecovers required if they have to abandon the load for any reason.
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 22
5.3 Technical Challenges - Logistics
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 23IMIA Working Paper 106(18) - Construction in Mountainous Regions
The lift!5.3 Claims - Logistical challenges
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 24
Value of works increases with time Value of equipment and material varies with time Exposure (and potential loss) is a function of the
project phase Vulnerability is a function of the project phase
Linth Limmern Switzerland
IMIA Working Paper 106(18) - Construction in Mountainous Regions
5.4 Technical Challenges - Dynamic Risks
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 25
Underwriting
6.0 Underwriting Considerations
IMIA Working Paper 106(18) - Construction in Mountainous Regions
A very key part of the process with - understanding the risk exposureparticularly on the more perceived ‘low key’ elements.
Quality of Risk information – do we always get enough to fullyunderstand the risks
Exposure from locations away from project site
Risks exposures due to duration of works, scope change, costincrease, site issues.
Contract certainty – Type of wording. MRe or Market Reform type
Sub Limits – often very high due type of work and remote locations ofsites.
Difficult to evaluate DSU values – entrepreneurial risk? ViewingGalleries for instance?
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 26
Claims
7.0 Claims and Lessons Learnt
Limited information available with respect to some claims because ofconfidentiality and that some still at a sensitive stage
There were also some other very unique claims. We were made awareof claims involving sabotage, rebel action on projects that had started todemobilize from site and left key items such as power cables in theground. Only when they came to be reenergized did the project realizethat local villagers had cut the cable for salvage costs. Henceremobilization costs were significant when these sort of items occur
The examples that follow are some of the consequences of theexposures in Mountainous regions for Underwriters to consider.
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 27IMIA Working Paper 106(18) - Construction in Mountainous Regions
7.1 Claims – Pipeline Projects
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 28IMIA Working Paper 106(18) - Construction in Mountainous Regions
7.1 Claims – Pipeline Projects
The consequences of this incident • The damage occured at an altitude of 5,000 metre above sea level.
The air was too thin for any helicopters to transport new pipe sectionsto the required locations
• Due to the difficult mountainous terrain and extreme weatherexperienced at such high altitude, The remobilization of Contractorsequipment and machinery to carry out the removal of backfill, cuttingof damaged pipes and re-welding was a muliple of the original projectcost by a factor of 3 to 4 times.
• The need to conduct repeat hydrostatic and other testing requiredsignificant additional costs and time.
• Salvage issues due to high cost of disposal.• Time required to resolve delayed the project by several months
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 30
7.3 Claims – Hydro and Dam Projects Pakistan
IMIA Working Paper 106(18) - Construction in Mountainous Regions
• A 130 MW Hydro Power Project in Pakistan encountered 1 in 80 years flooddue to unprecedented rainfalls in the catchment areas in July 2010.
• This flood water breached/ overtopped the cofferdam at the Weir and washed itaway, entered the 5 km long Tunnel under construction, exiting with brute force,resulting in a massive land slide towards the Power house and maincamp/stores located at a lower elevation.
• It caused severe damage to the Insured contract work including plant andmachinery resulting in claim of USD 30 million, 2 years delay due toinaccessibility.
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL
7.3 Claims – Hydro and Dam Projects Pakistan
IMIA Working Paper 106(18) - Construction in Mountainous Regions 31
• Selection of wrong location for main camp and stores, directly in therange of outlet of the tunnel and subsequent land slide prone arealead to several fatalities and dumping of several meters of debris,causing loss to equipment and other property
• Munich Re clause 110 for safety precautions not followed to the spirit.• Changes in weather patterns lead to an unprecedented flood of
intensity more than the 80 years recorded history
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 32
7.4 Claims – Hydro and Dam Projects
IMIA Working Paper 106(18) - Construction in Mountainous Regions
The Hidroituango dam overthe river Cauca, about175km (110 miles) north ofthe city of Medellín, wasjust months fromcompletion when on 28April a landslide near thesite blocked a tunnel builtto divert the river's flowwhile construction wasgoing on.
5000 people evacuateddownstream
Early stages of theassessment. Full impactwon’t be known for quite awhile.
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 33
Claims
7.5 Claims and Lessons Learnt
Remobilization costs were significant when these sort of items occur
Re work costs always in excess of the original project installation costs
Higher Sub Limits can give rise to some additional costs to Physicaldamage values and become fairly extensive claims
Wording leakages and broad cover
Time for Loss adjusters to visit the project if very remote location – maynot be able to after snow has gone for instance.
Definition of Event and occurrence also very key in the Loss adjustingprocess.
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 34
Conclusion
8.0 Conclusions
Projects in mountainous regions require experienced personnel tomanage and successfully deliver them. They also take longer to deliverand can be more sequential with multiple work fronts.
‘Access is Success’ – Setting the standard from the outset and investingin the right solutions to facilitate the project are absolutely key.
The Nat Cat and technical exposures can never be underestimated. Theweather can play a major part. It may mean the works are restricted forpotentially up to 6 months.
Underwriters need to have a clear understanding of the project scope –refer to outline checklist/guide for what should be supplied.
Complex Exposures - When it goes wrong it can have devastatingconsequences – no doubt the new working group on UndergroundProjects will tell us more in 2019 after the events in Columbia and Laos.
IMIA Working Paper 106(18) - Construction in Mountainous Regions
© Z
uric
h In
sura
nce
Com
pany
Ltd
CONFIDENTIAL 35
Thank you for your attention.Welcome any questions that you may have ?