IMIA Conference Munich, September 2017

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1 IMIA Conference Munich, September 2017 WORKING GROUP PAPER 103(17) DIESEL ENGINES 1

2 Working Group Members Christina Hall Class Underwriter, Construction & Engineering Alvaro Jaureguizar Cervera Loss Adjuster Engineering & Construction RTS International Loss Adjusters Christian Kolbe Loss Adjuster Power & Construction Miller International Dave Kent UK Trading & Underwriting Manager Aviva Ali Arisoy Assistant Manager, Engineering & Liability VHV Reasurans AS Sponsor: Stephan Lammle, Munich Re 2

3 Agenda 1. Introduction 2. The Technology 3. Risk Management / Risk Assessment 4. Claims / Loss Experience 5. Underwriting Considerations / Insurance Aspects 6. Future Developments 7. Conclusion 3

4 1. Introduction The Scope of the paper concentrates on larger scale industrial Diesel Engines used mainly in power production, either as prime power supply or for standby power However It is noted that Diesel Engine technology is part of the reciprocating engine family of technologies - also commonly known as Internal Combustion Engines Diesel Engines were first patented and built in the 1890 s 4

5 1. Introduction From this To this (circa 1902) (2016) 5

6 2. The Technology What are the component parts of a Diesel Engine? How do they work? What are they used for? Who makes them? Why diesel? 6

7 2. The Technology Main components Bedplate & Crankshaft Cylinder / Engine Block Camshaft Cylinder liner Piston Fuel Injection system 7

8 2. The Technology How it works STRUCTURAL PARTS Provide support for running parts Keeps running parts in position / line Form a protective casing Provides passages for cooling water, lube etc Support for auxiliaries RUNNING PARTS Converts power of combustion into mechanical work 8

9 2. The Technology Who / What / Why WHO WHAT WHY MAN Diesel & Turbo Transportation Robust and reliable Wӓrtsilӓ Power Generation Higher Energy Density Hyundai Heavy Industries Emergency Power Supply Relatively low up-front costs Mitsubishi Heavy Industries Combined Heat & Power installations Rapid start-up Caterpillar Quick ramping to full load Cummins Flexible load response Operate in challenging environments 9

10 3. Risk Management / Risk Assessment Internal Exposures Physical Environment Socio- Economic & Political Operator Training & Experience Maintenance 10

11 3. Risk Management / Risk Assessment Lubrication Fuel Quality Lead Times of Major Components Control Systems Fire Protections & Fire Fighting Service Agreements Availability & Performance Guarantees 11

12 4. Claims / Loss Experience Operational failure is the most recurrent cause of damage... 50% of cases Followed by: External factors 30% Manufacturing failures 20% elements most prone to failure... are cylinder linings, pistons, connecting rods, crankshafts and turbocompressors Accounting for approx. 80% of all claims 12

13 4. Claims / Loss Experience What happens when Diesel Engines fail? 13

14 5. Underwriting Considerations / Insurance Aspects What Where Decision Who Unknown 14

15 5. Underwriting Considerations / Insurance Aspects Site surveys Health & Safety Wordings & Clauses Environmental Exclusions Probable Maximum Loss 15

16 6. Future Developments For investors, the drive is towards: Greater efficiency Longer overhaul intervals Lower maintenance costs Reduced emissions For Insurers, the drive is towards: Fewer losses Less costly losses Better Risk Management Greater understanding of exposure 16

17 7. Conclusion Is there a future for Diesel Engines? The Working Group believes, yes, diesel engines will be around for a while longer! Reasons Overall, the advantages outweigh the disadvantages, for example: * Can work in difficult environments (high altitude, variable ambient temperatures) * Flexible peaking and intermediate power generation (covering supply shortfall in wind & solar power) * Good stand-alone power supply for remote locations * Higher electrical efficiency than gas turbines * Robust, relatively simple, relatively low up-front costs and highly reliable ALWAYS PROVIDED THAT THE EQUIPMENT IS INSTALLED AND MAINTAINED PROPERLY 17

18 THANK YOU! ANY QUESTIONS? 18

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