1. INSURANCE: AN EFFECTIVE RISK TRANSFER VEHICLE
PROJECT RISK MANAGEMENT & ALLIANCE
FOUR POINTS BY SHERATON HOTEL
SHANGHAI, CHINA
OCTOBER 22-23, 2009
INSURANCE: AN EFFECTIVE RISK TRANSFER VEHICLE
Good afternoon.
I would like to thank Marcus Evans for promoting PROJECTS RISK MANAGEMENT & ALLIANCES.
Nowadays, Risks are becoming more and more complex and losses and exposures take place in huge magnitude.
Recently, our country, the Philippines was hit by two strong typhoons that devasted the northern part of the island of Luzon,
severely affecting lives and properties.
Almost simultaneously, there was earthquakes and tsunami in Samoa, earthquakes in Indonesia and floods in India.
During our lifetime, we were able to come across unimaginable losses—either financial, damage to properties or loss of lives.
Some major losses that impact the way we do business today were total losses in Bhopal, Bintulu Refinery, Toulouse Chemical Plant,
Piper Alpha oil platform, Exxon Valdez, Barings and Enron collapse, UBS and AIG losses, Financial Sector losses in USA and UK.
Imagine the rehabilitation and restoration needed to fund all of these physical and material losses amounting to billions
and trillons of dollars?
And what about the loss of human lives which cannot be replaced?
And EPC Project risks is just one of the many risks that we have to manage properly, hence Project Owners and
Stakeholders will not only lose huge sums of money but the beneficiaries of such projects will be compromised,
and it could mean, make or break for a nation and its people.
CARLOS H. YTURZAETA Director, E&RM Phils., Inc.

2. PRESENTATION OVERVIEW
PROJECT RISK MANAGEMENT & ALLIANCE
PRESENTATION OVERVIEW
Presentor’s Perspective
EPC Projects/Types of EPC Projects
EWRM: Foundation of INSURANCE
Project Players Concerns
CREDITORS
CONTRACTORS
PROJECT OWNERS
INSURERS
EPC Project Activity/Project Participants
Some Common Loss Exposures in EPC Projects
INSURANCE Solutions/Benefits/Claims Administration
Post Loss Objectives
No substitute for a Comprehensive EWRM.
My presentation will cover the following:
Perspective, types of projects, and so on.

3. PRESENTOR’S PERSPECTIVE
PROJECT RISK MANAGEMENT & ALLIANCE
PRESENTOR’S PERSPECTIVE
As an Insurance Officer – Project Owner
As a Risk Manager – Project Owner
As an Insurer/Reinsurer/Reinsurance Broker
As a Claims Manager
As an Auditor/Accountant/Compliance Officer
In this presentation, my perspective is more as a PROJECT OWNER.
For 25 years, I have worked in an energy conglomerate called Philippine National Oil Company (PNOC).
PNOC is engaged in refining, distribution and marketing of oil; renewable energy like geothermal, coal, and gas;
exploration of oil, gas, geothermal and coal; shipping and transport as well as dockyard operations; research and development of
renewable alternative energy like biogas, ethanol, biodiesel.
Saudi Aramco was a partner at the oil refining and distribution under PETRON CORPORATION from while the
Philippine Government l holds 40% ownership of the company and the public with 20%.
Today, it is already a completely privatized company.
For 25 years I held various positions from auditor, accountant, compliance officer, insurance officer, risk and property manager,
insurer and reinsurer, claims manager and project owner representative.
However, in Dec 2002, at the age of 49 years old,
I exercised an early retirement and for seven years now, I have been enjoying a fairly good exciting life of balance between
rest and recreation, professional development and social, community and charity work.
And one of the things that occupy my professional development work is my passion for Risk Management and Captive Insurance.

4. EPC PROJECTS:MEGA PROJECTS
PROJECT RISK MANAGEMENT & ALLIANCE
EPC PROJECTS:MEGA PROJECTS
Major infrastructure that costs over US$1 Billion.
Projects attracting high level public attention.*
Projects inviting high level political interest.*
Substantial direct and indirect impacts on the community and environment.*
Projects with large magnitude of tasks involved in planning, developing and management.*
Design and Construct; Turn-key Basis; Design and Build; Lump-sum
EPC Projects are more or less synonymous with Mega Projects – huge infrastructure projects.
*Maybe below US$1 billion but the impact is great.

5. According to Ownership
PROJECT RISK MANAGEMENT & ALLIANCE
EPC PROJECTS
According to Ownership
GOVERNMENT – OWNED (Petronas, Pertamina, PNOC, PTT, PROC, etc)
Wholly-financed by government
Partly government and partly private
PRIVATELY -OWNED/PRIVATELY- FINANCED
May have different ownership structure - JVs, SPVs,
JOINT VENTURE – PRIVATE AND GOVERNMENT
Wholly - private but with government investment/financing
Partly private and partly government but managed by privately
…with different ownership structure.
NOTE: SOME PROJECTS ARE SELF-MANAGED

6. EPC PROJECTS According to Purpose
PROJECT RISK MANAGEMENT & ALLIANCE
EPC PROJECTS According to Purpose
UTILITIES
WATER SUPPLY
WATER DISTRIBUTION
ELECTRIC DISTRIBUTION
HUGE SUBSTATIONS
DESALINATION PLANTS
MASSIVE IRRIGATION SYSTEMS
ENERGY
POWER PLANTS
TRANSMISSION LINES
OIL AND GAS (UPSTREAM, DOWNSTREAM)
PETROCHEMICALS
MINING & EXPLORATION
GEOTHERMAL & COAL
WINDPOWER
HYRDRO & WINDPOWER PLANTS
…..and different purposes and objectives and benefits to community and country.

7. EPC PROJECTS According to Purpose
PROJECT RISK MANAGEMENT & ALLIANCE
EPC PROJECTS According to Purpose
TRANSPORT
ROADS & BRIDGES
MASS RAIL TRANSPORT
AIRPORTS
TUNNELS & WATERWAYS
HARBORS & PIERS
VESSELS
TELECOMS
TELEPHONE LINES
TELECOMS TOWER
INTERCONTINENTAL CABLES AND LINES
SATELLITES

8. EWRM: THE FOUNDATION OF INSURANCE
PROJECT RISK MANAGEMENT & ALLIANCE
EWRM: THE FOUNDATION OF INSURANCE
Before I formally proceed with the discussion on the USE OF INSURANCE in EPC PROJECTS, I would like to give you the FOUNDATION of INSURANCE, which is RISK MANAGEMENT.
INSURANCE is part and parcel of EWRM. It is an important tool in Risk Finance.
RISK MANAGEMENT 101

9. RISK MANAGEMENT ENTERPRISE-WIDE
The Total Approach to the protection of assets, earnings, liabilities, reputation, and personnel against predictable and unpredictable losses in order to achieve the maximum efficiency at minimum cost.
Risk Management is now called Enterprise-wide Risk Management because the risk exposures of an organization or even a country
and its people are so huge and complex that a TOTAL APPROACH is necessary in order to protect lives, properties and environment.
Modern definition of Risk Management or Enterprise-wide Risk Management. The old definition simple dealt with insurable assets that were insurable.

10. THE RISK MANAGEMENT PROCESS
Here is my favorite Graphical Chart on EWRM. EWRM is a PROCESS.
It consists of Identification, analysis, control, finance and administration.

11. RISK IDENTIFICATION METHODS
(Risk Profiling)
Survey or questionnaire
Going through the Company’s financial records
Review of contracts, audit reports and surveys
Flowcharting of operations
Consulting/Engaging 3rd party experts
Ocular and physical inspection
Table top discussion/interview with key personnel
Risk identification or Risk profiling is the first step.
There are many ways of identification and profiling and I will not discuss this in detail anymore.

12. RISK MEASUREMENT/ANALYSIS
Frequency - probability or chance/likelihood
Workshop/Brainstorming
Loss History
Forecasting
Severity - impact of losses/adverse effects
PML, EML, mathematical models
Impact on 3rd parties
Simulation models
The second step is Risk Measurement and Analysis.
After identifying the risk and/or loss exposures, we measure the FREQUENCY and the SEVERITY of the LOSS.
FREQUENCY is the probability or the chance or the likelihood that such event will occur.
SEVERITY is the impact or adverse effects of an event if it occurs.

13. RISK MEASUREMENT/ANALYSIS
F r e q u e n c y
Improbable S e v r i t y
Regular
LOSS CONTROL
and
PREVENTION
Negligible
RETENTION
This quadrant is what I normally use in my presentations about EWRM.
You can find other books, presentations and lectures containing more boxes, sometimes 6, 8 or even more.
But I would like a simple one. One that is basic. A quadrant.
Here we can see that the FREQUENCY of an event could take place from improbable into regular while the SEVERITY of
an event could be negligible towards being catastrophic.
I use the quadrant to measure SEVERITY & FREQUENCY in order to identify what POSSIBLE EWRM SOLUTION can be used
in order to mitigate, reduce and control the adverst effects of the event.
And if you look at this quadrant, INSURANCE is only one of the many EWRM solutions to mitigate effects of
negative/adverse events.
CRISIS MGMNT
Good Governance
Bus Continuity Plan
Disaster Recovery Plan
INSURANCE
Bus. Continuity Plan Disaster Mgnt Plan
Emergency Mgnt Plan
Catastrophic

14. RISK MANAGEMENT TECHNIQUES
RISK CONTROL – Stop losses from happening or if it happens, reduce the effects and impact of the loss.
AND/ OR
RISK FINANCE - Provides fund if and when losses occur.
The 3rd step of EWRM is to adopt an appropriate/applicable EWRM Technique, whether to CONTROL or FINANCE or to do both.

15. RISK CONTROL RISK FINANCING 1. Retention through 1. Risk Avoidance
RISK MANAGEMENT TECHNIQUES
RISK
CONTROL
RISK FINANCING
1. Retention through
- Deductibles
- Reserve/Funds
- Current Expensing
- Borrowing
- Self-Insurance
- Captive Insurance
2. Transfer through
- INSURANCE
- Hold Harmless/Outsource
1. Risk Avoidance
2. Loss Prevention
3. Loss Reduction
4. Segregation of Risks
5. Combination
Diversification
Outsourcing
Risk CONTROL is basically avoidance, prevention, reduction, segregation, combination, diversification and outsourcing.
Risk FINANCE on the other hand is retaining risks and losses through deductibles, reserving, expensing, borrowing,
self-insurance and captive insurance while transferring risks and losses thru INSURANCE and hold harmless clauses
and again, outsourcing the risk exposures.

16. CONTROL (Avoid, Prevent, Reduce)
QUESTION: CONTROL OR FINANCE?
CONTROL (Avoid, Prevent, Reduce)
In an EPC contract or Project Management contract, the project owner and all parties concerned should have to strike a
proper balance in order not to compromise the interests of the various parties involved, especially the ultimate
beneficiaries of the project.
The questions to be asked are: Is there enough financial resources to immediately rebuild, restore and replace
in case there is a loss. Is there an adequate risk transfer mechanism to fund such restoration and rebuilding?
If the answer is leaning towards NOT ENOUGH, then, the organization should really have a comprehensive EWRM
control program in place.
FINANCE
(Retain or Transfer)
IDEAL: PERFECT BALANCE

17. RISK MANAGEMENT TECHNIQUE TRANSFER
INSURANCE
EAR, CAR
Guarantees and Bonds
ALOP following EAR, CAR, Marine
Cost Overrun
Repayment Guarantees
Errors and Ommissions, Professional Indemnity
Reinsurance
Non-insurance transfers
contractual transfers
hold harmless
outsourcing or subcontracting-use of 3rd party experts.
TRANSFERRING of risks is a risk management solution of last resort.
The key to managing risk is CONTROL—anticipate, avoid, prevent, reduce, recovery, continuity of operations.
Since we’re talking about maximizing insurance as a Risk Management Technique, we will deal with all the
insurance coverages applicable to EPC Projects.
Actually, EPC Project-type of arrangement is a Risk Management approach in order to minimize huge loss exposures
on the part of
the Project owner. The project is outsourced, there is a fixed contract price, all responsibilities are defined and cost-benefits
are properly considered even in the start of the project.
That in itself is Risk Management in contrast to a project that is handled by the owner himself—engineered, procured,
construct, funded, operated, maintained, paid, etc. by the owner.
May it be an EPC Contract or a Project Management Contract, Risk Transfer through INSURANCE, Reinsurance and
Non-insurance transfers like contractual transfers, hold harmless clauses and outsourcing and subcontracting,
INSURANCE PRINCIPLES & PRACTICES are still the same.

18. RETAINED/FUNDED RISK (Deductibles, Funded Self Insurance, etc)
QUESTION: RETAIN OR INSURE?
RETAINED/FUNDED RISK (Deductibles, Funded Self Insurance, etc)
Again, there has to be a perfect balance in transferring risks. Not all INSURANCE PROVIDERS will accept all types of risks.
Some of these risks like those predictable recurring and normal events, those caused by gross negligence,
gross incompetence and grave erroneous conduct, and finally, the extreme ones like sabotage and terrorism,
fraud and syndicated felonies could hardly if not totally be insured.
TRANSFERRED RISKS
(Insurance and Hold Harmless)
IDEAL: PERFECT BALANCE

19. CONTROL OR FINANCE RETAIN OR TRANSFER?
CORPORATE CULTURE
FINANCIAL STRENGTH
LOSS HISTORY
MARKET CONDITION
MANAGEMENT STYLE
Note: Management may set a policy on risk retention and transfer once the EWRM is set in place.
At the end of the day, the balancing act of INSURING/TRANSFERRING risks and RETAINING/ABSORBING risks depends
on several factors:
The culture of the organization whether they are risk takers or risk averse.
The financial strength of the company, whether they have enough funds to absorb risks or not.
The loss history, whether losses dominate their projects in the past or not.
The industry situation, whether or not the present situation is inclined towards insurance or towards prevention and control.
And of course, the Management style.

20. PROJECT RISK MANAGEMENT & ALLIANCE
MAXIMIZING THE USE OF INSURANCE
Let us now evaluate how we can make optimize the use of Insurance as a Risk Financing mechanism to protect the
various interests in the EPC projects.

21. EPC PROJECT PARTICIPANTS
HOST
GOVERNMENT
SUPPLIERS
EQUIPMENT
MANUFCTRS
FEEDSTOCKS
EPC
CONTRACTOR
SUB-CONTR
OPERATOR
ADVISORS
LEGAL/EWRM
CREDIT/FINANCE
ENGRS/CONSULT
PROJECT OWNER*
First of all, let us identify who are the key players of the PROJECT, may it be EPC or other types of mega projects,
regardless of the ownership and relationship structure. Each interest should be properly protected and INSURANCE
is one of the most important tool in Managing Risks.
POWER
PURCHASERS
DISTRIBUTORS
INVESTORS
CREDITORS
LENDERS
INSURERS
REINSURERS
GUARANTORS
*COULD TAKE MANY DIFFERENT FORMS: JV, MULTIPLE OWNERS, SPVS, INVESTORS ONLY DURING CONSTRUCTION, ETC.

22. EPC PROJECTS: PHASES OF ACTIVITIES
PLANNING/DESIGNING/COST BENEFIT/FEASIBILITY/SELECTION OF FINANCIAL ADVISORS/LENDERS/INVESTERS
ESTABLISHING PROJECT OWNER/COMPANY/EITHER EXISTING OR NEW ENTITY
FINANCIAL CLOSING/BIDDING OF PROJECT/CONCLUSION OF CONTRACTS
We also have to know the different phases of activities involved in the PROJECT—from conceptualization, feasibility study,
planning, designing, selection of advisors, establishing the project owner, financial closing, bidding, conclusion of contracts,
construction, shipment of machineries, commissioning and testing.
SHIPMENT OF MACHNERIES & EQUIPMENT/CONSTRUCTION
COMMISSIONING AND TESTING

23. EPC PROJECTS: PHASES OF ACTIVITIES (Con’t)
TURNOVER/ACCEPTANCE BY PROJECT OWNER/COMPANY
TURN OVER TO OPERATOR AND/OR MANAGEMENT COMPANY
COMMERCIAL OPERATIONS/ACCOMPLISHMENT OF OBJECTIVES OF THE PROJECT
….turnover and acceptance by the PROJECT OWNER, turnover to Operator and/or Management Company, commercial operations,
payment to lenders and creditors and investors, generating income to pay for lenders and investors, and continuous operations.
GENERATING INCOME/PAYMENT TO LENDERS/INVESTORS
FULL PAYMENT AND CONTINUOUS OPERATIONS

24. SOME OF THE RISK/LOSS EXPOSURES
EPC PROJECTS RISK MANAGEMENT
SOME OF THE RISK/LOSS EXPOSURES
SUBSTANTIAL COST OVERRUNS >50% OF ORIGINAL COST.
SUBSTANTIAL BENEFIT SHORTFALLS
BANKRUPTCY OF PROJECT OWNER/CONTRACTOR/OPERATOR
WITHDRAWAL OF LENDERS
CANCELLATION OF HOST GOVERNMENT PERMITS
POLITICAL RISKS LIKE WAR AND TERRORISM.
WITHDRAWAL/BANKRUPTCY OF INSURERS AND REINSURERS
DELAY START UP AND DELIVERY.
DELAY IN EQUIPMENT PROCUREMENT AND DELIVERY.
LOSSES DURING CONSTRUCTION
LOSSES DURING COMMISSIONING AND TESTING.
WITHDRAWAL OF POWER PURCHASER OR DISTRIBUTOR
CURRENCY FLUCTUATIONS
UNSTABLE LAWS, LEGAL &, REGULATORY FRAMEWORK, PRICING
ERRORS IN DESIGN AND RESULTANT SPECIFICATIONS
Knowing the key players of the PROJECT and the PHASES OF ACTIVITIES will then give us the various risks and loss exposures
that surface before, during and after project implementation.

25. Stable contract price; Cost overruns provided
EPC PROJECT RISK MANAGEMENT: CREDITORS’/LENDERS’ CONCERNS (Bankability/Acceptability of Project)
Project completion as scheduled: normally tied up with off –take agreements or income generation.
Stable contract price; Cost overruns provided
Provision for Extension of Project Costs and Project Completion date
Output/Off-take Guarantees (ALOP/DLD)
Limited liability of Project Owner to Contractor
Performance & Surety Bonds – 20% performance and 10% surety for design & latent defects & Retention.
Security from Contractor (Consortium and its Head Offices): Back to Back Guarantees
And every PROJECT key player has its own concerns and issues to settle. Take the case of the CREDITORS/LENDERS.
Lenders are exposed more than anyone else in the PROJECT, especially in PROJECT MANAGEMENT where the collateral is
the COMPLETED PROJECT itself.
If the Project fails, the Creditors will certainly be left holding the bag. Major concerns
therefore are Costs, Completion and Realization of Project benefits.

26. EPC PROJECT RISK MANAGEMENT: CREDITORS’/LENDERS’ CONCERNS (continued)
Viability of project maintained until operation.
All changes/milestones communicated to Lenders.
Lenders named as additional co-insured.
Limited design and techno risks
Lowest Country, political and credit risks.
Comprehensive Insurance Cover (seamless cover)
Guaranteed Payment of Loan.
Smooth Certifications Process (acceptance, commissioning & testing, governments, environmental, international standards)
Moreover, Creditors and Lenders are concerned by the project viability until the loan is fully paid and secured.
In some instances, Lenders would want to be named in the policy to the extent of its exposure in the project.
Creditors are worried about country risks, design and techno risks, seamless insurance cover, and government
and industry standards certification process.
In fact, some Creditors require certifications as a pre-requisite for
the final financing draw-down.

27. EPC PROJECT RISK MANAGEMENT: CONTRACTOR’S CONCERNS
COMPREHENSIVE INSURANCE PROGRAM
SEAMLESS INSURANCE PROGRAM
OWNER CONTROLLED INSURANCE PROGRAM
HOST COUNTRY LAWS, REQUIREMENTS.
LOCAL EXPERTISE –SUPERVISORY & LABOR
LOCAL MATERIALS & EQUIPMENT
LOCAL SUB-CONTRACTORS—ENGINEERING & SUPPORT SERVICES
REASONABLE PROJECT OWNER
The Project Contractor on the other hand has its own concerns and issues to reckon with. Being the one on the
Contractors are becoming more selective. Especially is oil and gas projects, Contractors are limited and
Project Owners and Sponsors are also categorized as Class A, Class B and Class C in terms of professionalism and integrity.

28. EPC PROJECT RISK MANAGEMENT : PROJECT OWNER’S CONCERNS
THE MOST APPROPRIATE PROJECT THAT WILL GIVE THE DESIRED BENEFITS/OBJECTIVES
AN IDEAL CONTRACTOR/MANAGER/SUPPLIER
ATTRACTIVE FINANCING SCHEME & LIBERAL CREDIT TERMS AND CONDITIONS.
SEAMLESS INSURANCE PROGRAM
LEASE COST
EFFICIENT CLAIMS ADMINISTRATION
TECHNICAL SUPPORT SERVICES
CLASS ‘A’ REINSURERS
Munich Re, Allianz, Hanover Re, General-Cologne Re
Swiss Re, Zurich Financial Services
SCOR, AXA
GARD; Scandinavian RI
Lloyds Syndicates/Bermuda RI
AIG/Hartford
And of course, the Project Owners Concerns and issues.
The Project Owner’s desire is to come up with the most appropriate
project that will give the desired benefit and objectives of the stakeholders, selection of an ideal contractor and other
service providers, attractive financing scheme and seamless protection thru a comprehensive insurance program.
Project Owners/Sponsors normally benchmark with best practices and network with industry players.
More often, Project Owners are driven by competition and customer demands.

29. INSURANCE COVERAGES EPC PROJECTS RISK MANAGEMENT
Here are the various insurance programs that are available to an EPC Project. Each Player or stakeholder in the Project has
his own protection needs. And therefore, the most appropriate and comprehensive risk management program should be in place.
Insurance should only be secondary.

30. OWNER-CONTROLLED INSURANCE PROGRAM
EPC PROJECTS RISK MANAGEMENT
OWNER-CONTROLLED INSURANCE PROGRAM
Over-all Control of the EPC reinsurance program.
Seamless transition from construction to Operational phase.
Coverage as least cost due economies of scale.
Delay in Start Up (DSU) or ALOP can be easily effected
Owner has choice of insurer security – Class A & Industry
Claims paid directly to Owner or JV Owners.
Interface with Owners existing insurance program.
Where handover is on phase-by-phase basis.
Elimination of redundant insurance services & expenses.
All Project parties covered for same risks – single point responsibility- back-to-back guarantees.
Control of Claims/Coordinated Claims Admin.
Safety/Loss Control services from Insurance providers.
OCIP or owner-controlled insurance program are secured by the Project Owner either new or within the existing OCIP program.
Large companies have existing OCIP for CAR and EAR, CGL, etc. and all they have to do is to report such risks with existing reinsurers.
The advantage is that only one party is responsible for bundled service rather than unbundling which may be expensive
and may result in gaps.

31. BENEFITS OF A COMPREHENSIVE INSURANCE PROGRAM
EPC PROJECT RISK MANAGEMENT
BENEFITS OF A COMPREHENSIVE INSURANCE PROGRAM
PROTECTION IS ASSURED IF COVERAGE IS SEAMLESS
FUNDS DELAYS IN PROJECT COMPLETION.
ENHANCES PROJECT CREDIT.
INSURANCE IN A PROJECT BECOMES A FORM OF
Collateral
Enhanced form of security
ENHANCED CONFIDENCE OF LENDERS
REDUCTION OF PROJECT FINANCE COSTS
REDUCTION IN PROJECT OVERHEADS.
STAKEHOLDERS CONFIDENCE
PEACE OF MIND OF ALL PLAYERS.
DELIVERY OF DESIRED PROFITABILITY FOR ALL.
In any project, a seamless insurance program is always desired by the Project Players.
More than the maintenance of the needed capital for the project, some of the benefits of a comprehensive insurance program are…..
protection is assured,enhanced lenders confidence, reduction in costs and overhead, stakeholders confidence, peace of mind
and delivery of desired profitability.

32. EPC PROJECTS RISK MANAGEMENT RESPONSIVE CLAIMS MANAGEMENT
PRIOR TO THE LOSS
--Proper Property Valuation/Appraisal
--Adequate Bonding Requirement
--Specific Job Description/Deliverables
--Loss simulation; Drills and exercises; Training & Education; Emergency Preparedness,
--Loss History; Loss Forecasting
DURING THE LOSS
-- Reliable and capable adjusters with integrity
-- Disaster Management/Disaster Recovery
-- Salvage and subrogation values and rights.
-- Preservation of evidence and securing of witnesses
POST LOSS
-- Submission of documents and evidences.
-- Close coordination among claimants, adjusters, insurance companies,
brokers and other third parties if any.
-- Policy interpretation; Questions on clauses
-- Payment on Account; Settlement in 30 days
-- Negotiation skills; compromise and ex-gratia settlement.
-- Subrogation/Recoveries.
-- Business Continuity
Equally important is the Claims Administration Program not only in EPC Projects but even in going concern businesses.
Yes, primary concern of Project Owners is to come up with a comprehensive insurance program.
Normally, Insurers/Reinsurers and Project Owners should formulate a guidelines on Claims Administration and should form
part of the EPC Project Documentation and to be communicated to all concerned parties.
Likewise, included in such Claims Administration Program is the pre-selected Loss Adjusters and Surveyors in cases of losses.
Otherwise, there could be a tug-of-war who to appoint when the loss occurs.

33. INSURERS EXPECTATIONS
PROJECT RISK MANAGEMENT & ALLIANCE
INSURERS EXPECTATIONS
COMPREHENSIVE PROJECT SURVEY REPORT
Nature of Project: Turn-key, Lump Sum, Design & Build
Exposures: Natural and Man-Made/Terrorism & Sabotage
Risk Management Program
Project Owner’s Management Culture especially OHSSE
SELECTION OF RISKS
Class A, Above Average Risks of the Project
Long-term relationships
Integrity of Project Owner and other parties to the EPC Project
Integrity/Track record of all other players: contractors,
operators, lenders, operators
Host government’s exposure to political risks/current legislations
PROJECT STANDARDS
Local government, international
Industry standard
Fire Codes; Materials Standards
The Seamless Insurance Coverage as well as a Responsive Claims Administration Program are achieved only when INSURERS
expectations are met.
More than the premiums, the Insurers/Reinsurers expect a comprehensive project survey,
integrity of project players, commitment of host governments, and the adoption of global industry standards.
As the Risk Financing Vehicle provider, it is concerned with the Management Culture and Good Governance of the
Project Owner and Contractor.
It is for this reason that it is advised that the Insurers/Reinsurers of EPC Projects
should primarily consists of the SAME Insurers/Reinsurers of the Operational completed Project, hence we call it SEAMLESS.

34. PROJECT RISK MANAGEMENT & ALLIANCE SOME STATISTICS ON LOSSES
IN THE AIRLINE INDUSTRY
70% OF THE ACCIDENTS WERE CAUSED BY
HUMAN ERRORS.
IN THE SHIPPING INDUSTRY
65% OF THE ACCIDENTS WERE CAUSED BY
HUMAN ERRORS
50% OF THE ACCIDENTS TOOK PLACE ON A
CLEAR DAY.
IN THE OIL & GAS BUSINESS
50% WERE DUE TO NEGLIGENCE
WORK PERMITS, POOR HOUSEKEEPING, CHANGE MGNT.
As the saying goes, “To err is human, to forgive is divine”.
Because of such loss statistics, more and more the need to educate and train personnel from Project Owner to Contractor
and Sub-Contractor becomes imperative.
Because of this, there is NO SUBSTITUTE TO A PRO-ACTIVE ENTERPRISE WIDE RISK MANAGEMENT PROGRAM.

35. LOSS EXPERIENCE CYCLE ABNORMAL BUSINES CYLE
PROJECT RISK MANAGEMENT & ALLIANCE
LOSS EXPERIENCE CYCLE
ABNORMAL BUSINES CYLE
In every loss experience, there should be lessons learned.
Very important is loss prevention, loss reduction or loss avoidance.
Post loss evaluation is also important.
*ONLY possible if there is a comprehensive insurance program that is in place.

36. PROJECT RISK MANAGEMENT & ALLIANCE POST-LOSS OBJECTIVES
SURVIVAL
CONTINUITY OF OPERATIONS (normal capacity?)
STABILITY OF EARNINGS
GROWTH POTENTIALS
HUMANITARIAN CONDUCT/CSR
ENVIRONMENTAL IMPACT
INVESTMENT RETURNS TO ALL PARTIES
ATTAINMENT OF THE PROJECT OBJECTIVES/BENEFITS
When there is a loss, we need to answer questions like:
Can we survive the loss? Can we continue operating at normal capacity?
Can we maintain the present level of earnings? Is the forecasted growth levels still attainable?
Are we going to have potential environment and humanitarian liabilities?
Will our shareholders still be assured of the normal return on their investments? Can we still maintain present dividend rate?
5. Will the objectives and benefits of the project still realizeable?

37. PLANNING, DESIGN, CONTRACT SIGNING
PROJECT RISK MANAGEMENT & ALLIANCE NO SUBSTITUTE FOR A SOUND RISK MANAGEMENT PROGRAM
PLANNING, DESIGN, CONTRACT SIGNING
RESPONSIBILITIES OF ALL PARTIES
TRACK RECORD/EXPERIENCE OF ALL PARTIES
INVOLVEMENT OF REINSURERS from beginning
CONTRACT REVIEW-Mismatched related contracts (b2b clause)
LOSS CONTROL MEASURES-CONSTRUCTION
PREVENTION/REDUCTION
BUSINESS CONTINUITY PLAN/EMERGENCY RESPONSE
DISASTER MANAGEMENT & RECOVERY
DEVELOP CULTURE OF RISK MANAGEMENT
CONTROL OF INSURANCE (OCIP)
INSURANCE/REINSURANCE/RETENTION
SEAMLESS INSURANCE COVER
CLAIMS ADMINISTRATION
We can, therefore, say that in CIVIL OR ENGINEERING PROJECT, big or small, there is no substitute for a
SOUND RISK MANAGEMENT PROGRAM.
When we say, there is no substitute for a sound EWRM program, it means an “ounce of prevention is better
than a pound of cure”.
From planning to design to contract signing, up to construction, testing and commissioning, and finally to operations,
a comprehensive EWRM program should be in place.
Which means, there should be proper loss control, loss prevention, loss reduction, risk finance and risk transfer
measures that are in place.

38. ALLIANCES OF RESOURCES
IN SUMMARY: PROJECT RISK MANAGEMENT ENTAILS:
ALLIANCES OF RESOURCES
CONTINUOUS
ENTERPRISE-WIDE
RISK MANAGEMENT
PROGRAM/ADMNIN
In summary, PROJECT RISK MANAGEMENT requires ALLIANCE of initiatives and interventions.
These ALLIANCES should bring together the use of TECHNOLOGY, PROCESSES and of course, the most important of all,
PEOPLE. PEOPLE, the most important resource of the organization.
And PEOPLE is the most sensitive among all ALLIANCES.
It is for this reason that HUMAN RESOURCE TRAINING & DEVELOPMENT comes into play.
That is why Conferences like these are very important, not only as a source of learning but also to BENCHMARK & NETWORK
so that each one can benefit from BEST PRACTICES.
Thanks to MARCUS EVANS for putting this conference together with partners, sponsors and alliance providers.
Have a nice day.

39. ACKNOWLEDGEMENTS/REFERENCE MATERIALS USED
Risk and Insurance Management Association of the Phils (RIMAP)– various annual conferences from
Risk and Insurance Management Society of North America (RIMS)-various annual conferences in Winnipeg, Florida and San Francisco from
International Federation of Risk and Insurance Management Association of Asia and Pacific (IFRIMA) discussion meetings in Florida, Cologne, San Francisco from
Federation of Asia Pacific Association of Risk Management Organizations (PAFARMO) annual conferences – Malaysia, Singapore, Sydney, Philippines from
Presentation of Wolfgang Zimmermann of Allianz AG, Industrial Division-Engineering/Marine, 2004.
Books written by George Head of Insurance Institute of USA and Prakash A. Shimpi of Swiss Re New Markets.

40. CARLOS H. YTURZAETA Certified Public Accountant (CPA)
Ex-Licensed Underwriter & Reinsurance Broker, Insurance Officer, Risk Manager
Lecturer, Insurance Institute of Asia & the Pacific (IIAP)/Marine Underwriters Asso of the Phils.(MUAP)/Philippine Institute of CPAs (PICPA)
Consultant/Speaker Trainor on Enterprise Wide Risk Management/Captive Insurance/ Accounting, Audit and Tax/Property Management/Estate Planning, DMP, Crisis Mgnt, Claims Admin. Systems and Procedures, Emergency Management, Business Continuity.
Established the first Philippine Captive in Bermuda (Overseas Ventures Insurance Corp.or OVINCOR)‏
Established/Gen. Manager of-the first “controlled” Phil. Insurer (Petrogen Insurance Corporation), a fronting company for OVINCOR.
25 years in the largest energy conglomerate in the Philippines consisting of Petron, PNOC, PNOC-Energy Development Corp, PNOC-Shipping & Transport Corp., PNOC-Coal Corp, PNOC-Exploration Corp, PNOC-Tankers Corp—in various capacities.
Social work, cooperatives, and community development thru Rotary Club Makati Edsa (District 3830) & Jose Carlo P. Yturzaeta Memorial Foundation, Inc.

41. MARCUS EVANS CONFERENCES
THANK YOU.
ENJOY THE REST OF THE WEEK.
CARLOS H. YTURZAETA
DIRECTOR, E&RM PHILS., INC. CHAIRMAN, MUAP
LECTURER/TRAINOR, Enterprise Wide Risk Management, Insurance and Reinsurance, Captive Insurance, BCP, DMP
Address: & 41