Forum 2013 Climate change: new challenges, new approaches

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Information about Forum 2013 Climate change: new challenges, new approaches

Published on February 18, 2014

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Climate change: new challenges and new approaches Workshop moderated by the Gaëtan Lefèvre Insurance Manager CMI Group, Chairman of BELRIM, Member of scientific committee of FERMA 01/10/2013 - Inspire 1

Climate change: new challenges and new approaches Lucka Kajfez-Bogotaj Professor for Climatology, University of Ljubljana, Slovenia “Climate change: facts & choices” Tommaso Capurso Head of Internal Audit Division “ Operations and Technical Systems”, SNCB Holding “Practical application of “Cyndinics” – the science of danger – for risk managers” David Cadoux Property & Casualty Chief Risk Officer, AXA “Macro-economic trends, political risk management & insurability” Jeremy Hindle, Head of Enterprise Risk Aggregation, XL Group “Climate change risk assessment: impacts & opportunities” 2

Climate change: new challenges and new approaches Facts & choices Lučka Kajfež Bogataj University of Ljubljana, Slovenia 01/10/2013 3

Agenda 1. 2. 3. 4. 5. 6. Key problems Climate Change Challenge in a Nutshell Extreme events Swift action required: mitigation Adaptation issues Conclusions 4

Key questions 1. Can 9 billion people be fed equitably, healthily and sustainably? Increased demand 50% by 2030 (IEA) Energy 2. Can we cope with the future demands on water? Climate Change Food Water Increased demand 50% by 2030 Increased demand 30% by 2030 (FAO) (IFPRI) Biodiversity The Perfect Storm? (Beddington, 2009) 3. Can we provide enough energy to supply the growing population coming out of poverty? 4. Can we mitigate and adapt to climate change? 5. Can we do all this in the context of redressing the decline in biodiversity and preserving ecosystems? 5

Transgressing safe boundaries Rockström et al. 2009 Nature, 2009 6

Greenhouse gases climb Earth’s energy imbalance: more energy coming in than going out Additional radiative forcing from GHG above preindustrial times is now 2.9 Wm‐2 (32% increase since 1990) 7

The climate change challenge in a nutshell  Average temperature of the earth has risen by 0.8 degrees Celsius since 1900  Expected rise in global temperature of 3°C or more by the end of the century  Temperature rise results in extreme weather events and impacts (e.g. flooding, droughts, sea level rise, etc.)  Human action mainly responsible for observed and projected climate change  Risk of major economic and social disturbances particularly in developing countries  Swift action required to:  Reduce the causes of climate changes (mitigation)  Prepare for the impacts of climate change (adaptation) 8

Monitoring of climate system 9

Mechanisms responsible for changes in climate extremes 10

Observations for northern hemisphere land global warming is already increasing extreme weather events Extreme summer heat anomalies now cover about 10% of land area, up from 0.2% (1951-1980) Frequency of occurrence (vertical axis) local standard deviation (horizontal axis). Temperature anomalies in the period 1951-1980 shown in green Hansen et al., Proc. Natl. Acad. Sci., 2012. 11

Hazard intensity and frequency increasing linked to climate variability and change Intensity Socio-economic Impacts of weather and climate-related extremes on the rise ! Strong Wind Heavy rainfall / Flood Drought Heatwaves Frequency 12

Climate change scenarios Available theories on causaility agreement on these theories For instance, World economy in 100 Years For instance, climate system For instance, Weather next week Information on relevant parameters 13

IPCC AR5 2013 14

Provisional scenario analysis 2050-2100 High Climate Sensitivity Worst Case Failed Mitigation Policies 3-6ºC 6-8ºC 2-5ºC Best Case 2-3ºC Successful Mitigation Policies Low Climate Sensitivity 15

Climate change impacts Physical systems (ice, rivers, etc.) Climate Change Impacts Food yields Biological cycles Direct health impacts (heat, extreme events...) Stern Report (UK, 2006) Indirect impacts Economy: infrastructure, output, growth Wealth (and distribution); local environment; etc. Human Well-being 16

Climate risk as an enterprise risk Enterprise Risks Example Specific to Climate Change Hazard risks: liability torts, property damage, natural catastrophe Financial risks: pricing risk, asset risk, currency risk, liquidity risk Operational risks: customer satisfaction, business continuity, product failure, reputational risk Strategic risks: competition, social trend, capital availability o Property damage or increasing maintenance costs from floods, hurricanes, droughts o Insurance or business loans that rise in price or become unavailable in flood-prone or coastal areas Energy or other commodity price shocks or volatility o o o o o o o Changing requirements for equipment or heating and cooling Changing resource availability and quality (water, power) Customer obligations not met due to supply interruption Market shifts, reduced product demand First mover advantage for meeting new market demands Possible public responses to resource constraints (water access, public health concerns) leading to compliance or regulatory costs , 2013 17

Climate change mitigation in a nutshell Fossil Fuels are Cheapest Energy Subsidized & do not pay costs (solution: rising price on carbon) Technology Development Needed Driven by certainty of carbon price (government role limited) Regulations also Required Efficiency of vhicles, buildings...spatial planning 18

Realities of reducing CO2 emissions  Stabilizing at 450 ppmv CO2-e means 2050 global CO2 emissions must be reduced by ~7-9 GtC/yr  To understand the size of this challenge, consider some examples of what avoiding 1 GtC/yr in 2050 requires… - energy use in buildings cut 20-25% below BAU in 2050, or - fuel economy of 2 billion cars ~4 l/100 km instead of 8 l/100 km, or -1 million 2-MWe wind turbines replacing coal power plants or - 2,000 1-GWe(peak) photovoltaic power plants replacing coal power plants - cutting 2005 tropical deforestation rate in half worldwide Socolow & Pacala, 2004 19

Adaptation is now inevitable... The only question is “will it be by plan or by chaos”? IPCC, 2007 20

Climate change and European regions 21

Adaptive capacity “is the ability or potential of a system to respond successfully to climate variability and changes.“ (IPCC 2007)  Awareness  Technology and infrastructure  Economic resources  Institutions 22

Vulnerability to climate change “ is a function of the character, magnitude, and rate of climate variation to which a system is exposed, its sensitivity, and its adaptive capacity.” (IPCC 2007)  Countries which expect a high increase in impact seem to be less able to adapt  Climate change would trigger a deepening of the existing socioeconomic imbalances between the core of Europe and its periphery. Future runs counter to territorial cohesion ? 23

Projecting changes in both physical and human systems is necessary for anticipating future risks from climate change IPCC SREX (2012) Progress requires closer integration of research on climate science and human systems 24

Taxonomy of the future 25

Conclusions  Climate Change is a Large Issue : majority of the sciences and engineering disciplines are involved, business/industry has a stake, every sector of the economy affected, involves citizens and politicians, all aspects of our lives touched: jobs, health, politics, national security, etc.  Exploration of future climate is relevant : Where are we heading? Actions now influence the future: Inertia (lifetime avg. power plant > 40 years; lifetime CO2 in atmosphere > 100 years. Climate system may change irreversibly, we may pass thresholds…  We shall (or need) to act: prevent certain futures from happening, adapt to certain futures  Companies must address climate risks: not only financial, operational and strategic risks, but also regulatory, liability, or reputational risk 26

Climate change: new challenges and new approaches Practical Application of "Cindynics“ The Science of Danger for Risk Managers Ir. Tommaso Capurso MIA, CCSA, CIA, QA, EFARM, CRMA Internal Audit, SNCB Holding, Belgian Railways, Belgium

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Agenda 1. Introduction 2. Cindynics 3. Conclusions 4. Q/A – – Major accidents: generic and specific lessons learned The dilemma of "antagonist" and/or not prioritized objectives – – – – – Why the cindynics now, since other methodologies are available No theory here, just a few recalls and definitions Key concepts in the methodology of cindynics Seven-step process/tool kit for systematic application Illustrations based the major accident of Fukushima – Conclusions – One may ask the question: is there a feeling of risk? Yes ! Discussion 28

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Major accidents (1/2): generic lessons learned • "Experience shows that catastrophes … never have a single and simple cause. There is always a complex chain of events and deficiencies that leads to these kinds of accidents. Causes can almost always be traced back to managerial, organisational and human interface factors. A catastrophe is an accident of the organisation …" (ERA, European Railway Agency, Railway Safety Performance in the European Union, 2010) • "An accident generally arises from a failure of the dynamic interactions in the whole system rather than the local failure of one or more parties" (René Amalberti) • "In technological systems, it is not possible to avoid all serious accidents, regardless of the effort invested in safety, because their complexity reaches levels that prevent us dealing fully with all the eventualities" (Charles Perrow, "Normal Accidents", Princeton, 1999) 29

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Major accidents (2/2): specific lessons learned (Fukushima) “It was a profoundly manmade disaster”. « We believe that the root causes were the organizational and regulatory systems that supported faulty rationales for decisions and actions, rather than issues relating to the competency of any specific individual ». Official report of The National Diet of Japan Fukushima Nuclear Accident Independent Investigation Commission (NAIIC), July 4th, 2012 30

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers The general dilemma of the decision-maker/manager: "antagonist" and/or not prioritized objectives I just want that one ! Sorry, they are sold together ! Enterprise Service Performance Productivity Budgets Schedules … Risk In particular in the field of safety The Management to the Chief engineer : « Take off your engineer's hat and put on your manager's hat » 31

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Little or no systematic methodology for the systemic analysis of incident/accident risks Most of the existing approaches are using :    The thematic approach, not necessarily using a specific/exhaustive typology The chronological approach (event-based) To be pointed out the air crash investigations approach (by an "AAIB" or Air Accident Investigation Bureau) – Reconstructing the event – What happened? – Why did it happen? – Understanding the phenomena – Updating codes and models – Publishing recommendations Inventor of the wheel Inventor of risk He should have applied cindynics! 32

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Risk perceptions vary among individuals 33

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Definition of a « new » word : cindynics • The concept of “cindynics” was presented in 1987 by Georges-Yves Kervern at the UNESCO international conference in Paris on technological risk management • Litterally, its meaning is “science of danger”, from the greek “kindunos” (“danger”) • The concept is based on the “theory of systems”, organizations being considered as complex, open and interacting systems • In the cindynic approach, the danger can be characterized by: – the different networks of actors confronted with “dangerous” situations; – the way they look at the situation; – the structuring of the different views according to 5 “dimensions”, “perspectives” or “axes” (facts, models, goals, rules and values​​); – the identification of "dissonances" between the networks of actors; – the deficits that affect each of these dimensions. 34

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Seven-step application of the cindynic approach to incident/accident studies The 7-step tool kit. Step Aim I Defining the cindynic situation II Developing a description of the system or organisation III Developing and studying the hyperspaces associated with networks of actors IV Identifying systemic cindynogenic deficiencies, deficiencies in cindynic systems and dissonances V Establishing a summary matrix correlating actors with cindynic failures VI Drafting a narrative summary VII Deducing actions to reduce deficiencies and dissonances EFARM presentation of the “mémoire” on the application of cindynics, 06/04/2011, AMRAE/Carm Institute, T Capurso 35

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Step I: Defining the cindynic situation Description of the situation: • Prospective view: risk analysis (potential danger) • Retrospective (after-the-fact) view: observations (incident, nearmiss, accident, catastrophe) – The facts characterising the problem, whether potential or real (statistics, data, KPI’s,… and context) – Example from the nuclear plant context (adapted from source EPRI, 11/2011): accidents remain possible, despite years of continuous Chernobyl risk analysis (04/1986) (03/1979) (03/2011) 36

1. Introduction 2. Cindynics 4. Questions/Answers 3. Conclusions Step II: developing a description of the system or organisation Attempt to model the network of Fukushima actors CABINET OFFICE NSC AEC OECD NEA [UE] IRS (International Reporting System) → Timeframe: Data base ~ 40 to 50 years (~8000 incidents reported) → Limits on the network of actors: TEPCO and the various national and international stakeholders involved (Nuclear safety Commission (Atomic Energy Commission) (Nuclear Energy Agency) Input = nuclear philosophy Regional Authority NB: Directives for radio protection, but no harmonization of safety MEXT (Ministry Energy, Education... Technology) Trade & Industry) [WENRA] Western European Nuclear Regulators Association IAEA METI (Ministry JAEA (Japan Atomic Energy Agency) NISA (Nuclear Safety and Industry Agency) Basic design Controls "Preparedness" Emergency plan Annual input from R-Ex (return of rexperience) by country: description; codification; lessons learned; correctives actions ) Basic Law SAFETY REGULATOR: Supervision & audit of safety regulation OFF-SITE CENTER TSO (Technical Safety Organization) (JNESO) R-Ex Network of TSO's (= ETSON network in (Nuclear Regulatory Commission) Initial design rules WANO World Association Nuclear Operators Proposal of standards and design criteria Exchanges R-Ex Peer review independent of the TSO s on cti pe Ins l va pro Ap US NRC Europe) TEPCO 37

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Step III: developing and studying the hyperspaces associated with networks of actors Each actor/organisation is modelled by its hyperspace of danger, which has 5 axes Rules (norms, laws, standards and ethical codes, inspections etc.) Representations and models (based on facts) Ethics (rules) Epistemics (models) Teleology (objectives, missions, goals) Statistics (or memory) (memory of facts and figures) Facts (memory, history, data and statistics, lessons learned) Objectives (goals, reasons for working) Axiology (values) Culture (value systems) The interactions between the various hyperspaces of danger are identified and located based on the missions/roles/responsibilities given to each actor (internal or institutional) → "cindynic flowchart" (interaction diagram with numbering if necessary). 38

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Step IV: identifying systemic cindynogenic deficiencies, deficiencies in cindynic systems and dissonances (1/2) The specific typology of G-Y.Kervern, with … specific semantics 10 main Systemic Cindynogenic Deficiencies DSC 4 cultural deficiencies 2 organisational deficiencies 4 managerial deficiencies DSC1 Infallibility DSC2 Oversimplification DSC3 Non-communication DSC4 Navel-gazing DSC5 Overemphasis on productivity DSC6 Dilution of responsibilities DSC7 Failure to learn lessons DSC8 Lack of adaptation to experience DSC9 Lack of cindynics training DSC10 Lack of crisis preparation 5 Dissonances D Statistical dissonance Epistemic dissonance Teleological dissonance Ethical dissonance DS Axiological dissonance DA DE DT DD According to G-Y Kervern Hyperspace gaps Cindynic system deficiencies Space gaps Dsc 6 to 10 Disconnects Dsc 11 to 18 Degeneration 27 Dsc 1 to 5 Dsc 19 to 23 Blockages Dsc 24 to 27 Dsc 39

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Step IV: identifying systemic cindynogenic deficiencies, deficiencies in cindynic systems and dissonances (2/2) Models "Technology" vs. "socio-technics" Rules Empowerment to laws and regulations? Legitimacy of rules? Understandability? Ergonomy? Appreciation of complexity? (simplism, infaillibility, development in stand alone) ? Knowledge tranfer formalised? Training? Comparisons (benchmarking) Way of using installations : integration in the "design"? Change management ? Socio-technical countermeasures to human and organizational factors ? Process of re-visiting and up dating of models? Process of trade-off of strategic priorities ? Attitude when facing perturbated situations : principles or rules based to manage safety? Clear segregation of duties ? (decision, management, control) Using the lessons learned ? Collection of data : systematic lessons learned, follow-up/reporting, concrete action plan ? Statistics Questions based on the development model of socio-technical systems Questions based on the components of an integrated safety model Intellectual integrity: - "healthy scepticism" - no complacency The methodical doubt in 3 steps 1) 2) 3) You doubt You doubt You doubt Are you sure ? Motivation towards safety : reactive or proactive ? Values "corporate" ? Safety policy/charter ? Objectives "SMART"? Culture of rik management ? Safety culture : "no blame" philosophy? Culture/values Interactions among actors Cindynic flowchart (interactions/deficiencies) (illustration) (real picture is A1format) Generic questions from reference systems such as SDLC (System Development life Cycle) What level of safety is settled ? Data base facts ? Sufficient attention to "weak" signals ? People involvement ? Are the corporate goals prioritised? KPI's - Performance management ? Goals and missions of the various stakeholders identified and aligned ? Ishikawa's “5 " questions Roles and responsibilities are controlled and respected ? Goals Cindynic questionnaire (illustration) (abstract) Questions inspired by the "5 axes" of cindynics applied to the problem and its context Preparation of a cindynics questionnaire 40

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Step V: establishing a summary matrix correlating actors with cindynic failures (1/3) x Symbol of systemic deficiency AIEA x Description of the Observations/interpretations in relation to deficiency Fukushima NSC US NRC X JAEA NISA X X MEXT TSO i METI Relationship no. TEPCO The matrix in step V aims to (try to) consolidate the cindynic potential of the organisation and the main stakeholders. Examples. DSC2 j X X X X DSC6 k X X X X X X DT DSC6 In terms of preventing Serious Accidents Cultural deficiency: Given the "cognitive limits" at a particular time, the "oversimplification". lack of a legal framework and clear, harmonised guidance (standards) in terms of design (scenarios/hypotheses to consider: earthquakes+tsunamis; power supplies-SBO; multiunit issues etc.) In terms of inspections. Organisational Lack of independence, transparency of operation and deficiency: dilution authority on the part of the regulatory bodies of responsibilities In terms of "emergency plan" (crisis management) Lack of emergency preparedness Goal dissonances. Excessive organisational Dilution of fragmentation/specialisation. responsibilities. Communication and coordination difficulties (crisis management, evacuation, operation of the off-site centre, etc.) 41

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Step V: establishing a summary matrix correlating actors with cindynic failures (2/3) Or according to the 5 cindynic axes, Fukushima (1/2) 1. 2. 3. Risk axis Deficiencies Facts (memory, Dsc22, Dsc18-dE/S  history, data and DSC7 statistics, lessons  learned) Representations Dsc21-DE and models (based on facts) DSC1, Dsc21-DE   Objectives DT, DSC6,Dsc23-DT  (goals, reasons for working) Dsc23-DT  A few examples of systemic deficiencies. Cognitive and learning deficiencies (historical, scale/probability of tsunamis etc.) Lessons/feedback, nonetheless reinforced by the cooperation between the Japanese TSO (JNES O) (associate member in 2010) and the European TSO network, "ETSON" Failure to adapt models to experience Inadequate ability to question the design and the operational hypotheses Lack of clear priorities between objectives (NISA vs TSO in particular: separation of functions). Organisational fragmentation and administrative formalism "The Fukushima accident revealed a significant need for consultation between TSO’s so that they can share information and ensure that analyses are consistent" (IRSN communiqué, 24/11/2011) 42

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Step V: establishing a summary matrix correlating actors with cindynic failures (3/3) Or according to the 5 cindynic axes, Fukushima (2/2) 4. Risk axis Deficiencies Rules (norms, DSC2 laws, standards and ethical codes, procedures, inspections DSC6 etc.)     DSC10 5. Culture (value systems) DSC2  A few examples of systemic deficiencies. Lack of a legal framework (clear, harmonised guidance: standards) in terms of design and safety evaluation (earthquakes, serious accidents) Failure to take account of "complex" events (multi-site impact, SBO etc.) Lack of independence, transparency of operation and authority on the part of regulatory bodies in terms of inspections Lack of preparation for the management of a nuclear emergency (coordination and harmonisation of methods and national technical support resources) Failure to disseminate an organisational culture of safety ("safety consciousness") through all the bodies involved in nuclear activities "Whatever to plan, design and execute, nothing can be done without setting assumptions. At the same time, however, it must be recognized that things beyond assumptions may take place. The Accident presented us crucial lessons on how we should be prepared for such incidents that we had not accounted for." (Investigation Committee, December 26, 2011) 43

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Step VI: Drafting a narrative summary (1/2) This aims to: • "tell the story", i.e. reconstruct the sequence of events, their causes and the decisions taken in the form of a summary, preferably free of jargon, putting the deficiencies and dissonances identified in context • avoid the reader having to decode the "cindynic flowchart" (often complex) and the table (potentially long) of correlations between actors and deficiencies The goal is to join the "dots" of the deficiencies identified. Child's play? 44

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Step VI: Drafting a narrative summary (2/2) One suggestion (there are others!) of a "reading grid" for interpreting the narrative: the components of a "socio-technical" system: • The technology • The human factor and safety culture • The governance ("organisation") • The environment Adapted from J-L Nicolet 45

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Step VII: Deducing actions to reduce deficiencies and dissonances According to one typology of socio-technical models. Section Reduction action. Examples relating to Fukushima. Technology • Reviewing the design of the installations' monitoring systems to acquire relevant information and an overview and enable the appropriate decisions (evacuation etc.) to be made and the necessary actions to be defined • For emergency situations, providing means of (tele)communication that will remain operational under "SBO" (Station Blackout) conditions Human • Technical culture → socio-technical culture → safety culture (controlledmanaged) ["No blame", "accident culture" etc.] • Disaster training (emergency response) • Staff education upgrading Organisation • The regulator must define the methodology (guides, standards etc.) for the ad hoc consideration of tsunamis, including design measures and criteria for evaluating their effectiveness • Emergency Preparedness: take steps to ensure operational functionality, especially off-site (Nuclear Emergency Response Headquarters) even in the event of a large-scale disaster • Define cooperation modes (vs excessive fragmentation of work) • Formal risk analysis, kept up to date and communicated to decision-making bodies • Evaluate plant robustness (stress test) • Improve the independence of the regulator (separate NISA from METI) with a unified agency (e.g. the Environment Ministry). (Nuclear Safety and Security Agency) The environment • Update scientific and technical knowledge in the area of tsunamis (probability, severity, etc.) ( deep defences + barriers) 46

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Conclusions Well! draw benefit from this experience 47

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Added value? $ The cindynic approach: • is general/generic in terms of risk management • is adaptable to the complexity of the problem (increased complexity of socio-technical systems, emergence of new risks, importance of lessons learned, multiplicity of relationships/actors etc.) • constitutes a qualitative systemic method for representing systems: • dynamic interaction between actors • putting in perspective the actors' context/knowledge in the danger situation It enables us to: • understand and model the "system" (organisational/procedural, cultural, technical, environmental, communication/information) and its temporal evolution cycle (events, decisions etc.) • structure the results • find what needs to be modified in the system to prevent the incident/accident recurring or, at least, reducing its probability • express an opinion (e.g. "deficiencies" vs "maturity" reading grid) about risk management 48

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Yes, but … I'll never ! • • • • • • • Yes, you will ! Modelling and evaluation based on an empirical typology, requiring interpretation by the user Omissions or redundancies possible in the formulation of diagnoses/deficiencies Expert judgement required to cover strategic and operational aspects Need for learning (case study prototype before any truly systematic/methodological application) Limits in relation to operational specificities (development models for sociotechnical systems: J Rasmussen, N Levison, etc.) Usefulness of cross validation via other approaches/models (J Reason's "Swiss cheese", integrated safety model, etc.) Multiple skills of the cindynician (methodological + business knowledge; facilitation techniques; courage, etc.) 49

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers The cindynic approach has a well-deserved place in an integrated approach to risk assessment "The new trend in accidentology will be cindynic flowcharts!" 50

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers However, « cindynicians » must take the culture and maturity of the company into account Rome was not built in a day ! The cindynics either ! 51

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Thank you for listening! 52

1. Introduction 2. Cindynics 3. Conclusions 4. Questions/Answers Mr Capurso, take a question at random! Can I give an answer at random? 53

Executive summary “Practical Application of "Cindynics", The Science of Danger, For Risk Managers” Ir. Tommaso CAPURSO Internal Audit, SNCB Holding, Belgian Railways, Belgium Head of the "Operations & Technical Systems" Audit Division “Cindynics”, the “science of danger”, word invented by Georges-Yves Kervern, is a discipline generally unknown to the large public of risk managers. Catastrophes of these last years (transportation; chemical industries; powerplants; oil platforms; financial crisis;…) are of multi causal nature and an “accident of the organization". The practical application of the systemic concept of “cindynics”, by modelling the interactions of the actors’networks : – illustrates the links of the complex chain of events and deficits, which may lead to an accident or a crisis, – shows that “an accident/a crisis is usually a failure of the dynamic interactions throughout the system rather than a local failure of one or more parties” , – provides a new, holistic perspective on risk assessment and management. The human factor is only the apparent “weak link” that should not overshadow other factors fundamental and deeply rooted (organization /procedure, culture, equipment, environment, communication/information). Thereby, risk managers can play a new, significant and adding-value role in tackling and auditing sensitive areas, through risk assessment, understanding of accidents/crisis, prevention of catastrophes or limitation of their impact … In this session, participants will : – Discover the key concepts of “cindynics”, – Understand its potential usefulness , in various sensitive domains, not limited to industry , – Get a “7 steps tool kit” for a systematic and disciplined application , – Learn how the approach can be used, through concrete examples and illustrations (the accident of Fukushima). 54

A few bibliographic references 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. « Master Classes In Entreprise- wide Risk Management » EFARM (« European Fellow in Applied Risk Management »), Carm Institute, Prof. J.-P. Louisot, Augerville, 27-29 september 2010 « L’archipel du danger », G.-Y. Kervern & P. Rubise, Ed.Economica, 1991 « Cindyniques – Concepts et mode d’emploi », G.-Y. Kervern & P.Boulanger, Ed.Economica, 2007 “Mémoire” EFARM about the application of cindynics, April 6th 2011, AMRAE/Carm Institute, T.Capurso “Lessons learned from Fukushima – Application of cindynics”, T.Capurso, annual AMRAE Conference in Deauville, 8th february 2012 « Les décisions absurdes : sociologie des erreurs radicales et persistantes », C.Morel, Gallimard ”Executive summary of the interim report”. Investigation Committee on the Accidents at Fukushima Nuclear, Power Stations of Tokyo Electric Power Company (TEPCO), 26/12/2011 “Nuclear safety: new challenges, gained experience and public expectations”, Forum EUROSAFE on nuclear safety, Paris, 7&8 november 2011, and particulalrly: 1. “JNES’s response to TEPCO Fukushima NPS accident” , Y.Nagakome 2. “Learning lessons from accidents with a human and organisational factors perspective: deficiencies and failures of operating experience feedback systems”, N. Dechy, J.-M.Rousseau, F. JeffroY, IRSN (Institut de Radioprotection et de Sûreté Nucléaire), France “US industry response to the Fukushima accident”, EPRI (Electric Power Research Institute), J.P.Sursock. Presented to International Risk Governance Council (IRGC), Lausanne, Swizerland, 3/11/2011 “Facts of and lessons learned from the Fukushima Daiichi Nuclear Power Plant Accident”, H.Nariai, WEC2011 Special session Fukushima, Facts and consequences, 07/09/2011 “Premiers enseignements de l’accident de Fukushima par l’Autorité de Sûreté Nucléaire”, Pr. M.Bourguignon. Presentation at the SFEN (Société Française d’Energie Nucléaire), 20/06/2011. “Concepts de la démarche dans les centrales nucléaires. La défense en profondeur : principe fondamental de la maîtrise des risques”, IMdR, D.Vasseur, EDF R&D, 10/04/2008 « Risques et accidents majeurs - Retour d’expérience cindynique », J.-L. NICOLET, Techniques de l’Ingénieur. « Introduction to human factors in the field of ATM » (« Air Traffic management »), Cours de l’Ecole Nationale de l’Aviation Civile et DSNA, S.Barjou, 21/01/2008 Illustrations about risk : « Le risque d ’entreprendre », Série Polynômes, Essentiels MILAN, 1999 Editorial Volume : 2000-2 , Bernd Rohrmann, Dept. of Psychology, Univ. of Melbourne, Parkville, Victoria 3052, Australia « Consumer risk perception », 55

Climate change: new challenges and new approaches Macro-economic trends, political risk management & insurability David Cadoux AXA P&C Group Chief Risk Officer 01/10/2013 56

Agenda 1. Increasing frequency and cost… 2. …with radical socio-economic impacts 3. Insuring and managing climate risk 57

Increasing frequency and cost… Munich Re, 2012 58

…with radical socio-economic impacts • Deep reshaping of the socio-economic environment:  Agriculture  Water  Health • Significant damage to world GDP 59

Insuring and managing climate risk • Insurability ? • Insurance industry can help society manage climate risk:  Provider of expertise  Driver of sustainable economies  Means to change behavior  Partner for public authorities 60

Conclusion Climate change is a major challenge requiring a call for collective action 61

Climate change: new challenges and new approaches Climate change risk assessment: Impacts & opportunities Jeremy Hindle Head of Enterprise Risk Aggregation XL Group 01/10/2013 62

Agenda 1. 2. 3. 4. 5. Potential Impacts for Insurers Putting Recent Losses into Context Gaps exist in Catastrophe Modelling Risk Aggregation & Tail Risk Management is Key The Opportunity 63

Potential impacts for insurers  What can we expect?  Increased drought, heat and extreme weather events  Climate change risk assessment report (UK Government 2012)  Many risks are not NEW, but adaptation to change is required  National Adaption Programme (2013): Flood Risk Management  The climate challenge (GDV 2011 – German Insurance Association)  Return periods of storm / Flood events are reducing  72% of house owners still do not have natural catastrophe insurance 64

Putting recent losses into context  Floods, drought & severe convective storms continue to cause havoc  2013  2012  2011    Germany Floods May / June €12 billion? Moore (USA) Tornado May $3.5 billion? Germany Hail July €1.5 billion?   Post-Tropical Storm Sandy September $20 - $25 billion? US Drought May/July - $11 billion?   US Tornadoes - $15 billion? Thailand Flood - $12 billion?  However, the total cost so far in 2013 ($45 billion) is only 50% of 10year average (per Munich Re)  Floods caused 45% of insured losses  Meanwhile, tropical cyclone activity globally remains light 65

Gaps exist in catastrophe modelling  Many gaps exist in vendor catastrophe models  Often these are for the perils most impacted by climate change  How do we capture "Exposed but Not Modelled"?  How do we model "Not Enough Modelled" ["Model Miss"]?  How to model "Not Modelled" risks? Country Australia Austria Canada Chile China Colombia Czech Republic France Germany Japan New Zealand Puerto Rico Switzerland Thailand United Kingdom United States x x x x Tropical Cyclone x x x x x x x Flood x x x x x x x x x x x x x x x x Severe Windstorm Convective Winterstorm Storm x x x x x x x x Wildfire x x x x x x x x x x = Model Exists = Material Gap = Becoming Material = less vital 66

Risk aggregation / tail risk management is key  Flood exposure is increasing in coastal cities1   Suggested tenfold increase in exposure by 2050 Ranking exposure by 1-100 year loss and annual average loss (AAL) yields surprising results: Rank 1 2 3 4 5 6 7 8 9 10   Urban Agglomeration Miami New York-Newark Osaka-Kobe New Orleans Tokyo Amsterdam Nagoya Rotterdam Virginia Beach Boston 100-yr AAL (% AAL $m exposure of GDP) 366,421 672 0.30% 236,530 628 0.08% 149,935 120 0.03% 143,963 507 1.21% 122,910 27 0.00% 83,182 3 0.01% 77,988 260 0.0026 76,565 2 0.0001 61,507 89 0.0015 55,445 237 0.0013 Rank 1 2 3 4 5 6 7 8 9 10 Urban 100-yr AAL $m AAL (% of GDP) Agglomeration exposure Guangzhou 38,508 687 1.32% Miami 366,421 672 0.30% New York-Newark 236,530 628 0.08% New Orleans 143,963 507 1.21% Mumbai 23,188 284 0.47% Nagoya 77,988 260 0.26% Tampa-St Petersburg 49593 244 0.0026 Boston 55445 237 0.0013 Shenzen 11338 169 0.0038 Osaka-Kobe 149935 120 0.0003 Future risk assessment must encompass Tail Risk (TVaR) Correlated lines of business (non-property) contribute to loss 1 Future flood losses in major coastal cities - Nature Climate Change 3 August 2013 67

The opportunity  Data quality is key to sound decision making  Need industry leadership on data mapping / industry classifications / industry exposure / loss databases  Limits tracking will assist in risk management  Insurance penetration is still low  Predictive modelling will be a competitive advantage for those that use it  And a competitive disadvantage for those that do not!  "Big Data" business intelligence modelling will help  Requires courage and skill to underwrite when the "goal posts" are moving 68

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