February 17th, 2009

Man-Made Catastrophes: 1Q2008

Posted at 12:50 AM ET

Julian Alovisi, Assistant Vice President, Instrat®

Location: Dearborn, Michigan, United States
Event: Severstal steel plant explosion
Fatalities: 0
Insurance Details: A blast furnace exploded at a Severstal steel plant in Dearborn, Michigan, on January 7, 2008, causing extensive damage and the suspension of production. The incident occurred when molten metal breached the furnace’s outer shell, and the breakdown caused heated raw materials and some liquid metal to spill from the furnace to the floor. One worker, a contractor with utilities infrastructure company Dano Corporation, was injured in the explosion. Severstal said it would fully refurbish the “B” blast furnace and estimated that the outage and decline in overall production (of around 35 percent) will last for 18 to 24 months.
Sources: The Detroit News, Reuters News, Metal Bulletin News, Insider Quarterly, Insurance Insider

Location: Buenos Aires, Argentina
Event: General Mills food plant fire
Fatalities: 0
Insurance Details: A fire destroyed a food plant owned by a subsidiary of U.S. food giant General Mills on the outskirts of Buenos Aires, Argentina, on January 15, 2008. Argentine television broadcast images of a thick plume of smoke rising from the plant and flames burning through the facility. Due to the rapid spread of the fire, officials decided to evacuate the area around the plant. Officials said all 450 workers at the plant were able to get out. Reports said 15 fire units were needed to put out the blaze.
Sources: EFE News Service

Location: Heathrow Airport, London, United Kingdom
Event: Plane crash landing
Fatalities: 0
Insurance Details: An inbound British Airways passenger plane carrying 152 people made an emergency landing several hundred meters short of the south runway at Heathrow Airport on January 17, 2008, damaging the aircraft, injuring 13 people, and causing delays at one of the world’s busiest airports. Flight BA038 was arriving from the Chinese capital Beijing when the incident occurred at 12:42 UTC. All 136 passengers and 16 crew on board the Boeing 777 escaped down the emergency chutes after the crash landing. Sources quoted by Business Insurance said the value of the Boeing 777 was around GBP63 million (USD123 million), while the airline has USD2.25 billion of liability insurance to cover passenger injuries. Insurance Day added that policies led by Global Aerospace Underwriting Managers could be triggered if engine or aircraft failure proves to be the cause of the crash, as the pool is reported to lead coverage for both the aircraft manufacturer, Boeing, and Rolls Royce, the engine manufacturer. An Air Accidents Investigation Branch (AAIB) interim report into the incident said it was likely to have been caused by ice in the jet’s fuel system. The flow of fuel dropped, causing the engines to lose power less than a minute before touchdown. However, investigators said they still do not know how the ice formed. The AAIB’s final report into the crash landing is expected to be published in 2009.
Sources: CNN News, BBC News, Associated Press, Agence France Presse, Reuters News, Business Insurance, Insurance Day

Location: Monte Carlo Hotel, Las Vegas, United States
Event: Fire at Monte Carlo Hotel
Fatalities: 0
Insurance Details: Guests were evacuated from the Monte Carlo Hotel in Las Vegas on January 25, 2008, after a fire broke out on the roof and top floor of the building. The blaze broke out at about 11:00 local time (19:00 UCT) but the flames were brought under control about an hour later. The hotel was forced to close after the fire and partially reopened in February. The hotel’s owner, MGM Mirage, reopened 1,200 of the hotel’s approximately 3,000 rooms on February 15, 2008, and an additional 1,300 rooms were reopened on February 22, 2008. The remaining 500 rooms - mostly suites on the upper floors where damage was more extensive - underwent complete renovations and took longer to reopen. MGM Mirage said the fire cost USD90 million in repairs and lost business and most of the loss was covered by insurance. The hotel was built in 1996 at a reported cost of more than USD300 million.
Sources: BBC News, Reuters News, Associated Press, Las Vegas Sun

Location: Queensland, Australia
Event: Business interruption losses for BHP Billiton
Fatalities: 0
Insurance Details: Severe flooding between January 18, 2008 and January 20, 2008 and February 9, 2008 and February 15, 2008 forced mining giant BHP Billiton to declare force majeure on contract deliveries from its seven mines in central Queensland. In all, production was disrupted at 33 coal mines across Queensland, affecting several other mining companies (including Rio Tinto, Xstrata Coal and Ensham Resources). However, mines jointly owned under an alliance between BHP and Japan’s Mitsubishi Corp (BMA) were the worst hit as operations were initially suspended and normal output at some of the mines was reduced for up to six months. The impact of the flooding on BHP Billiton’s sites resulted in significant volumes of water and mud flowing into the pits. The heavy rainfall also damaged mine equipment and cut access to roads and rail lines across large parts of the coal belt. In total, BHP Billiton said the floods slashed production from mines belonging to BHP Billiton Mitsubishi Alliance by up to 8.5 million tons, worth around AUD920 million (USD593 million). BHP Billiton said it had insurance cover for property damage and business interruption losses, which are estimated to have totalled around USD1.5 billion.
Sources: The Australian, Australian Financial Review, The Advertiser, Dow Jones International News, Reuters News, Australian Associated Press, The Courier-Mail, Insider Quarterly

Location: Port Wentworth, Georgia, United States
Event: Sugar refinery explosion
Fatalities: 13
Insurance Details: A massive explosion destroyed a sugar refinery in Port Wentworth, Georgia, on February 7, 2008, killing 13 workers and injuring more than 30 others. The powerful blast shook homes in Georgia and neighbouring South Carolina. The explosion, at Imperial Sugar Company, happened shortly after 19:20 local time (00:20 UTC on February 8, 2009) and totally destroyed the company’s three-storey building. Fire officials said the initial explosion started a fire that spread and gutted other parts of the refinery. More than 100 people were in the plant when the blast occurred. Investigators said they believe the disaster started in a room where workers bag sugar and that it was possible that sugar dust from the refining process had ignited, sparking the explosion. A spokesman for Imperial Sugar Company said the Port Wentworth refinery is 872,000 square feet, and some 111,000 square feet (around 12 percent) was destroyed in the incident. The plant sat idle for months until Imperial Sugar resumed refining sugar in November, when it unveiled a new 75,000-square-foot packaging plant to replace the one destroyed. Imperial said the explosion cost the company USD63.3 million, and insurance recoveries totalled USD36.1 million. The company added that the restructuring process is estimated to cost up to USD220 million, which is “within the limits of our insurance coverage.”
Sources: CNN News, Associated Press, Agence France Presse, Reuters News, CBS News, Just-Food, Knobias

Location: Big Spring, Texas, United States
Event: Alon oil refinery explosion
Fatalities: 0
Insurance Details: A massive explosion and fire rocked the Alon 70,000 barrel-per-day oil refinery in Texas on February 18, 2008, causing severe damage, injuring four workers, and shaking buildings miles away. The explosion occurred near the propylene splitter unit at the refinery, destroying a propylene recovery unit and damaging alkylation and gas concentration units, Alon said. The company was forced to shut down the refinery for almost two months until it was partially restarted on April 10, 2008. Its full 70,000 barrel-per-day capacity was reached in September. Alon said its insurance for property damage and business interruption was expected to cover the cost of the damages. Alon said its coverage combined a single limit of USD385 million for property damage, with a USD2 million deductible, and business interruption coverage with a 45-day waiting period. Alon also has third-party liability insurance, which provides coverage with a limit of USD150 million and a USD5 million deductible. In November, the company said USD280 million had been claimed for property damage repairs following the fire and at least USD90 million had been claimed for business interruption.
Sources: Reuters News, Associated Press, Dow Jones News Service, PR Newswire, Voxant

Location: Booneville, Arkansas, United States
Event: Cargill meat plant fire
Fatalities: 0
Insurance Details: A fire destroyed a Cargill Meat Solutions (unit of Cargill Inc) beef processing plant in Booneville, Arkansas, on March 23, 2008. Reports said sparks from welding equipment ignited the fire. Although nobody was injured in the blaze, approximately 1,000 people in Booneville were temporarily evacuated amid concerns about leaking ammonia gas and heavy smoke. The 150,000 square foot (14,000 sq. meter) plant, which produced frozen ground beef patties and portion control steaks for the food service industry, employed about 800 workers and could process 500,000 pounds of beef a day, according to Cargill’s website. Officials estimated the plant was worth more than USD100 million before the fire, and had just finished a USD40 million expansion. Cargill said it would not rebuild the plant in Booneville.
Sources: Reuters News, Associated Press Newswires, The Arkansas Democrat Gazette

Location: Dubai, United Arab Emirates
Event: Fireworks warehouse fire
Fatalities: 2
Insurance Details: A huge blaze ripped through a fireworks warehouse in an industrial area of Dubai on March 25, 2008, killing two people and injuring two more. The blast in the al-Quoz Industrial Area, which is home to hundreds of businesses and factories, caused a fireball to shoot 330 feet (100 meters) into the sky, with flames spreading to around 40 nearby buildings. More than 100 firefighters battled the blaze. An Interior Ministry official said the explosion occurred when fireworks were being loaded onto a truck for transport. The fireworks were believed to have been smuggled into the country illegally, he added. The official put the extent of the damage at more than USD250 million, while the Emirates Insurance Association estimated the damage at USD150 million. The Civil Defence said “inappropriate storage of fireworks may have been the cause of the explosion”.
Sources: Agence France Presse, Dow Jones International News, Reuters News, RIA Novosti, Associated Press Newswires

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Guy Carpenter’s Instrat® department provides CAT-i reports for major natural catastrophes worldwide. These reports cover catastrophes including worldwide tropical cyclones, earthquakes, major UK and European floods and any other natural event that is likely to incur a significant loss to the (re)insurance industry. Please email CAT.i@guycarp.com if you wish to be added to the free email distribution list.

Instrat also provides RISK-i reports for major technological or man-made events worldwide. These reports cover risks to property, transport and life including explosions, fires, crashes, engineering disasters and terrorist attacks that are likely to incur a significant loss to the (re)insurance industry. Please email RISK.i@guycarp.com if you wish to be added to the free email distribution list.

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