Earthquake Preparedness for Chemical Industries

Owners and Operators

Chemical manufacturers, petrochemical manufacturers, pharmaceutical, companies, agricultural facilities, chemical distributors, universities, hardware stores

Functional Areas

Manufacturing Plants, Transport Systems, Warehousing/Storage

Risk Transfer before a Catastrophe

Once a loss occurs, it is too late to revise an insurance policy. Consequently, the chemical industry policyholder must be extremely diligent during policy purchase and renewal. Understanding specific insurance requirements, carefully calculating the property and business interruption values, outlining contingency plans, and anticipating the potential losses at each location are all key steps in maximizing future insurance recoveries. In sum, paying close attention to the potential impact of a loss at the insurance procurement stage will help to minimize issues and maximize recovery when a loss does occur.

Proposing the best time-window(s) for maximizing insurance coverage before a catastrophe is the Earling solution for the Chemical Industry to transfer earthquake risks.

Maximizing insurance coverage after a catastrophic loss is difficult for any company but can be especially complex for policyholders in the chemical industry. Most chemical plants are integrated production networks that convert feedstock into thousands of intermediary and final products. The final production at one plant may be partially sold externally and partially used as feedstock at another plant. And, any break in the supply chain—whether it is experienced internally by the insured or externally by outside suppliers or customers—can lead to a costly workaround, irreplaceable production, lost sales, and extensive additional expense.

Recommendation on Disaster Risk Financing Strategies

provides some principles for - and outlines the main components of - an effective strategy for managing the financial impacts of disasters, including:

  • promoting comprehensive risk assessment processes that allow for estimation of exposures and identification of financial vulnerabilities;
  • supporting effective management of the financial impacts of disasters by all segments of the population and economy and encouraging the development of risk transfer markets for disaster risks;
  • and managing the financial impacts of disasters on public finances.