Flooding represents a significant risk for companies like Faurecia. In addition to having the potential to produce significant property damage, it can disrupt operations, which is why one of the world’s largest automotive equipment suppliers’ sites became the pilot for AGCS’ first-ever flood risk survey.
Specializing in the production and supply of highspec automotive exteriors and interiors, seating and emissions control technologies, Faurecia has a presence in 34 countries around the globe. Approximately, 100,000 people are employed at its 330 production and research and development sites across Europe, Africa, North and South America and Asia.
During 2015, the automotive equipment supplier decided to conduct a review to identify the exposure of these sites to natural catastrophe perils such as earthquakes, storms and hailstorm, with a particular emphasis placed on the risks posed by flooding.
“Naturally, the group turned to AGCS, our property insurer since 1998, and partnered with Allianz Risk Consulting (AGCS’ risk consultancy arm),” Michel Josset, Risk, Insurance and Real Estate Manager at Faurecia tells Global Risk Dialogue.
AGCS regularly conducts reviews of the natural catastrophe exposure of the major sites in its insured portfolio. For the Allianz Risk Consulting (ARC) team such reviews involve a number of different stages, starting with the assessment of local and regional data and information. Following the sharing of this with the company concerned, it can then arrange a visit to the site in order to provide a specific diagnosis – which includes a series of recommendations that can help to optimize the resilience of the site to a natural catastrophe event.
“The objective of the flood risk analysis is not to avoid
the flood, but to optimize site resilience”
“According to the Allianz Risk Barometer, natural catastrophe is the second top risk which occupies the attention of companies today, while the top risk – business interruption – often results from such events,” says Patrick Thiels, CEO of the Mediterranean Region, AGCS. “The impact of natural catastrophe events on businesses has increased significantly over the last decade, driven by the greater interconnectivity of the global economy,” he continues. “This is why, five years ago, AGCS decided to launch a global study of its portfolio to assess risks and exposures to natural disasters. We began with risks such as earthquakes and hurricanes and are now extending our in-depth studies to flood risks, with this service available to all businesses in 2016.”
Identifying the most probable flooding scenario
One of Faurecia’s French plants, located in Marckolsheim in the Bas-Rhin department in Alsace, northeastern France, was chosen as the first site to receive the flood risk survey.
The Marckolsheim site specializes in the production of vehicle interiors, in particular acoustic products, which are shipped around the world. This site is potentially highly-exposed to flooding risk, given that the facility is located close to both the Rhine and the Ischert rivers. It is also crossed by a water source that flows into a pond.
Following a two-day audit of the site and the undertaking of both statistical analysis and risk mapping of the surrounding area, ARC experts were able to identify the most probable flooding scenario to impact the site – a gradual rise in the level of the Rhine river. Based on such a scenario, they then prepared an in-depth diagnostic of this exposition, as well as a number of recommendations to mitigate the impact of such an event occurring.
A crucial point that was identified during the survey was the fact that if this event occurred, surrounding roads would become inaccessible. A knock-on effect of this would be that the company would then be unable to dispatch its products. Similarly, it would be unable to be supplied with the necessary materials to manufacture its products. The survey showed the potential for significant interruption to operations was high and needed to be considered further.
It is estimated that potential losses from the Marckolsheim site could exceed €8m ($9m) in overall damages in the event of such a scenario occurring. Following ARC’s site survey, Faurecia has initiated a risk preventive approach, implementing a flood contingency plan with the aim of better protecting crucial areas of the site.
Optimizing flood resilience
“The analysis of ARC experts created a heightened awareness regarding the flood risk of the site,” Josset explains. “Such natural catastrophe risks are now regularly monitored by Faurecia’s risk committee.”
“Our analysis demonstrated that the whole site could be flooded without any protection or undertaking of preventative measures,” adds Ludovic Leduc, Consulting Engineer at ARC, who was in charge of the diagnosis. “The plant is located in the plains, meaning the access roads to the site would not be able to be used while the water level was rising or subsiding, creating problems with ingress and egress. Therefore it was crucial for Faurecia to develop and implement a formal flood emergency plan to mitigate any potential losses.”
“Flooding is the 7th top cause of loss for businesses
today, AGCS analysis shows”
At the Marckolsheim site, this process is now up and running: the emergency plan has been drafted and the staff is being trained. The flood contingency plan implemented for this industrial site is to also act as a guide for 37 other Faurecia sites exposed to flood risks in Europe, Africa, Asia and the Americas – in locations as diverse as Argentina, China, Iran, South Africa, the UK and the US – meaning ARC will also be involved, for the first time, in a worldwide flood risk diagnosis.
“As far as the flood risks are concerned, we have put in place a collaborative process with AGCS,” Josset adds. “We share the results of our analysis through each step of the process. The aim of this approach is to identify the most exposed sites, to raise awareness and to put in place a risk-reduction action plan. The objective of the flood risk analysis is not to avoid the flood but to optimize the resilience of the site in question,” he concludes.
Flooding threat comes in many forms
Floods are a natural catastrophe that can be caused by many different events, including overflowing of natural or man-made bodies of water, surface water, tidal water, rainwater runoff, rising ground water, sewer back-up, or from blocked yard and roof drainage systems. Flooding poses a greater threat in low-lying areas, near a body of water, or downstream from dams, but even the smallest streams, creek beds, ditches, culverts, or drains can overflow and create flooding. Some floods develop slowly over a period of days, but flash floods can develop within a few minutes to a few hours and possibly without any visible signs of rain.
In short, floods can occur anywhere, making them one of the most common natural disasters. According to AGCS’ Global Claims Review, analysis of insurance claims over €100,000 ($112,000) shows that flooding is the 7th top cause of loss for businesses today.
Even if a property or site is not susceptible to flooding, the surrounding infrastructure may be exposed. This can create problems with ingress and egress, possibly resulting in a business interruption.