Q: How have you readapted Marsh’s operations for risk assessment and solution provision given the dramatic changes taking place in the national and international context?
SA: Despite the dramatic changes experienced by the national and international oil and gas markets, the fundamentals for insurances remain practically the same. All the engineering and technical aspects of exploration and production are not being affected by the drop in the oil prices. Nonetheless, oil and gas companies now have to realign their strategies in order to decrease their OPEX by up to 45%, which we believe will be the trend for the next few years.
RM: We usually suggest our clients perform a risk assessment in order to submit to the insurance markets the actual quality of the risk, which normally translates into a reduction in the cost of the premium. We normally see this analysis as an investment rather than a cost as it also helps our clients to identify risks and take loss prevention measures to avoid accidents.
Q: Are there any risks that were previously important to take into consideration, but have been eased or eliminated with the Energy Reform?
RM: The spirit of the regulations is positive and it is certainly moving the industry in the right direction. However, the reform also presents new challenges to operators. In this regard, it is important for authorities to oversee this issue and increase administrative efficiency to ease the documentation process that companies have to undergo according to the new regulations. Nonetheless, our job at Marsh is to help clients to comply with the official requirements, taking that load off of their shoulders, particularly for insurance-related matters.
SA: From the positive side, the Energy Reform has created numerous opportunities for the Mexican market. Furthermore, the national content rule provides an incentive for developing local talent, in terms of individuals and firms’ specialization. For instance, ten years ago, there was no Mexican company capable of performing an environmental baseline study, but now we have a wide range of national firms with the required knowledge and skills to do so. The same trend can be observed in other specialization areas, such as geological, engineering, or insurance studies. Therefore, we believe that the ecosphere of oil and gas production and exploration will be enriched by the challenges presented by the new industry.
Q: In matters of human talent, what services does Marsh provide to oil and gas companies?
RM: Mercer Marsh Benefits is the joint venture between Marsh's formidable negotiation power in health and life insurance, and the knowledge of Mercer in Human Resources, in order to generate value in the creation of insurance and non-insurance benefit programs for oil and gas companies' employees.
SA: Mercer Marsh Benefits has a comprehensive cost containment strategy focused on the needs of the Energy Industry, due to the important challenges now faced by the sector. On the other hand, Mercer, a sister company of Marsh, is the authority in talent and retirement, with a focus in helping oil and gas companies to successfully navigate the crisis by avoiding the loss of important talent as a result of the transition, which is characterized by a strong workforce reduction.
Q: What is the role that Big Data plays in risk assessment, and how is this involved in Marsh’s daily operations?
SA: Big Data and Analytics are important tools that need to be understood by all industries, not only insurance companies. In particular, the oil and gas industry is exposed to new risks resulting from the use of Big Data and Analytics tools, especially as their operations have become more dependent on technological solutions such as open architecture solutions, cloud data storage, and acquisition of off-the-shelf software.
The insurance sector has responded by developing specific products addressing these issues. At Marsh, we have created the Energy Cyber Gap product, which is an insurance solution that helps companies to manage technology-related risks. For instance, in big data applications, the main risks come by storing and transferring information, which can expose sensitive data to external attacks or internal mishandling.
RM: In addition, Marsh has designed an IT platform called Analytics, through which we can perform risk financing optimization (RFO) studies that can lead to the evaluation of return on investments and 5-15% cost savings. Marsh Analytics combines data, technology, and analytics to evaluate risk and allow more strategic business decisions. Risk management has quickly shifted from a focus on limited data and insurance to big data and holistic risk analytics. With this shift, the demand for analytics-based decision- making support tools continues to grow, and that is the reason for the development of the Marsh Analytics platform.
Q: What are the upcoming insurance trends you expect to see in Mexico, and what will be Marsh’s strategy to adapt
to this new environment?
RM: In the Mexican context, we are observing a growing interest in acquiring insurance programs, mainly as a result
of the difficult conditions faced by the oil and gas industry. Moreover, we foresee that the production capacity of the industry will develop considerably in the short to medium term, which will force companies to analyze and design strategies to mitigate the risks associated with these activities.
SA: In the oil and gas industry, we identified that the most visible trend in insurances and risk assessment will follow the line defined by the government with the local content rule. Until now, the industry has been mainly managed by multinationals and foreign companies, whereas now we expect to have a stronger presence of local staff and firms in the sector.
In other countries, the opening of an industrial sector to private investment has created a national ecosystem of companies, service providers, and advisors, and this is what we expect to see in Mexico. As a result, Marsh has been preparing for years, by increasing the share of local employees in our staff and enhancing our presence in the country.