Beirut explosion — dangers of hazardous materials

The Beirut explosion highlights, again, the dangers of storing, producing or transporting hazardous materials, particularly in or through areas of human settlement. Identification of so-called risky sites is critical, to enable risk engineering assessment and insurance coverage.

Potential impacts

  • Explosions, fires or toxic releases at storage, production and transport facilities can cause multi-million to multi-billion dollar losses for the insurance industry.
  • This can affect property and casualty covers through local impacts and global supply chain effects.
  • In the case of many fatalities, Life & Health portfolios in local markets can also be affected.

Last year’s storage explosion in the port of Beirut destroyed many lives and properties. It was not the only event involving a hazardous site. On 20 May 2020, a toxic gas release in India killed 11 and injured 1000,1 a painful reminder of the worst industrial disaster in the country ever, when a gas leak in 1984 in Bhopal killed 14410 and injured 200'000–300'000 people.2

The location of an industrial accident – be it an explosion, a toxic release or a fire, is the main determinant of the overall loss fallout. In many industrial zones, plants that in the past were at the outskirts of a city are today surrounded by settled territory. This is due to the expansion of cities. Residential quarters slowly encroached the previously remote facilities. Some sites are inherently risky, as the experience of the Tianjin harbour explosion in 2015 also showed. Storage and production of hazardous materials is in itself a risky business, but so too is the transport of the materials. For example, while one of the safest modes of transport, rail lines often pass through cities and populated areas. Accidents are rare but if they happen, the impact can be devastating.3

Insurers need to identify risky sites. A helpful starting point can be regulatory frameworks. For example, the chemical plant explosion in Seveso, Italy in 1976 triggered the EU’s “Seveso Directive”.4 The law sets clear standards on what makes a hazardous site and associated risk management requirements. Currently, over 12 000 sites are governed by the directive. The US equivalent is the “Risk Management Plan (RMP) rule”.5 Other countries like China or India are introducing comparable standards.6
There are also regulations with regards to safe passage / transport of hazardous materials.7

The power of directives depends on implementation. But for the purpose of risk assessment, even if insured sites adhere to robust regulatory standards, additional analysis of the location with respect surrounding population and land use, and exposure to natural perils that could trigger an accident, is required. Hazard mapping solutions like Swiss Re’s CatNet® can facilitate such investigations.8

References

1. “LG Polymers: South Korean CEO held over fatal India gas leak ”, BBC, 8 July 2020, https://www.bbc.com/news/world-asia-india-53330370
2. Y. Ichimura and D. Baker, “Acute Inhalational Injury”, Reference Module in Biomedical Sciences, 2019, https://www.sciencedirect.com/topics/medicine-and-dentistry/bhopal-disaster
3. “Lac-Megantic train explosion: Three charged in Quebec”,BBC, 13 May 2014, https://www.bbc.com/news/world-us-canada-27387287; “Italy court sentences former railway chief to 7 years in prison”, Reuters, 31 January 2017, https://www.reuters.com/article/italy-train-trial-moretti-idUKR1N1EG01Q?edition-redirect=uk
4. “Major accident hazards: The Seveso Directive - Technological Disaster Risk Reduction”, European Commission, https://ec.europa.eu/environment/seveso/
5. US EPA Risk Management Plan (RMP) Rule, https://www.epa.gov/rmp
6. Besserman and R. A. Mentzer, “Review of global process safety regulations: United States, European Union, United Kingdom, China, India”, Journal of Loss Prevention in the Process Industries 50 (2017), 165-183, https://engineering.purdue.edu/P2SAC/presentations/document/Global%20Process%20Safety%20Regulations.p
7. Regulations concerning the International Carriage of Dangerous Goods by Rail (RID) with effect from 1 January 2021, Intergovernmental Organisation for International Carriage by Rail, https://otif.org/en/?page_id=1105
8. Swiss Re CatNet®, https://www.swissre.com/reinsurance/property-and-casualty/solutions/property-specialty-solutions/catnet.html; USEPA Murphy Oil Spill, https://archive.epa.gov/katrina/web/html/index-6.html

Tags

Related SONAR content

Ammonium nitrate storage

Discover Ammonium nitrate storage

SONAR 2021: New emerging risk insights

While the COVID-19 crisis dominates the risk landscape, other emerging risks and trends arise from developments in human-machine interaction, connected infrastructures, and ethics and sustainability.

Discover