Insurance Only as Good as the BrokerWed, 01/18/2017 - 15:36
The fact that Mexican industrial companies are paying their premiums to their insurers does not mean they are doing all they can to prevent incidents from damaging their operations, says Armando Moreno, Commercial Director of Sespec, a Mexican company with more than 30 years’ experience in risk management across a range of industries, including petrochemicals, mining, automotive and tourism.
Moreno and his brother, Sespec’s Director General Gustavo Moreno, are experts in managing risk and providing insurance brokerage services to companies involved in complex and technical projects. They have successfully helped insure much of Mexico’s infrastructure during the past decades. As the oil and gas market opens to private companies for the first time, the brothers highlight the vital importance of risk management practices and explain why the services offered by Sespec will be indispensable for any oil and gas company hoping to capitalize on Mexico’s Energy Reform.
“An insurance company is only as good as your insurance broker,” Gustavo says, highlighting that a company will pay less in insurance premiums if their broker knows how to correctly manage risk and negotiate.
As a risk management and brokerage firm, Sespec takes a background role in the insurance process, first working with its clients to identify and analyze a company’s risks, then developing prevention programs to mitigate or eliminate them. Their service primarily helps companies obtain the most adequate and cost-competitive insurance premiums, while also increasing their profitability and reducing the chances of serious accidents. Past successes include halving the insurance premium paid by the federal government to insure Mexico’s highways.
Sespec identifies risk based on two variables: sensitivity and location. Assessing sensitivity involves determining the state of an asset and the likelihood of any failing or potential maintenance work, while surveying location involves determining the hostility of an environment. With so many risk variables to take into account in the Mexican oil and gas industry, such as fluctuating oil prices, the effects of climate change and aging infrastructure, both executives consider risk management strategies of the utmost importance for a company’s success. “All companies need to know that risk management consultancy is going to help them reduce insurance costs and the chance that an accident happens,” says Gustavo.
Lower insurance premiums are not the only financial advantage that Sespec’s service offers. “We can also help companies to be more profitable by extending the lifespan of our client’s assets,” Sespec’s Director General says. Through careful assessment of a firm’s infrastructure and the risks involved, Sespec compiles big data spanning a company’s entire operations. This allows them to identify the extent of maintenance work different assets require, helping companies to assign their budget in the most efficient and accurate way. Careful monitoring of infrastructure also promotes higher safety standards and prevents unnecessary downtime, and more importantly, serious accidents.
Risk management is vital to prevent losses that insurance alone cannot replace. “In every accident, there are additional costs which insurance companies are not able to cover,” says Gustavo, referring to the loss of human life, environmental damage and permanent market losses. It is here where risk management professionals step in to fill the gap that insurance firms cannot, putting preventive procedures in place before the worst occurs. Tragic accidents over the past years in the Mexican oil and gas industry are a stark reminder of the need for the type of service Sespec offers and the ultimate cost companies pay if they don’t invest in it.
Public infrastructure in Mexico is getting older, so the risk attached to them is increasing, says Armando. The stringent government budget cuts in recent years are an additional reason to invest in insurance and risk management, he argues. “The less money there is, the more need there is to maintain your assets” and avoid larger costs.
Sespec prides itself on an expertise honed over decades of experience and says its unique combination of engineering, insurance and risk management experience sets it apart.