As one of the largest energy companies in the world, BP has been employing sophisticated approaches to risk management for many years. Recently it has developed new ways of working, using insurance consultancy services to improve its management of existing risks and to find innovative solutions for new challenges.

The upstream oil and gas business presents some unique challenges. Each field is usually owned by a combination of companies as a joint venture (JV), with one company acting as the operator of the field. Where BP is the operator, it is responsible to its JV partners for operating the field, providing technical and financial services that can include insurance. Since BP self insures or retains most of its own risks in its captive insurance company rather than reinsuring them, in some cases it finds itself facilitating the purchase of insurance for JV partners but not for itself.

EXPERIENCE COUNTS WHEN IT COMES TO INSURANCE RISK SOLUTIONS

For an international energy giant, the insurance team is relatively lean, with 17 people, five of whom are dedicated to the upstream business and the 26 joint ventures it operates. David Anderson (head of Insurance Risk Solutions) and Patrick Daniel (team leader, upstream—Insurance Risk Solutions) foresaw an increasing demand for the BP's insurance team to work on new projects aligned with the company's growth strategy, on top of their work supporting established operations, or "silent running" as they call it.

"In order to enable our people to play a more active role in the new strategic projects, BP needed to look at the efficiencies in handling silent running," Anderson says. "So rather than just recruiting extra people into the team, we decided to look at using external consultants to manage those aspects of silent running that lend themselves to a more standardized process."

BP had already adopted a similar approach in its downstream refining and retail business, and in its alternative energy operations. "Joint ventures make the upstream business more complicated," Daniel says. "Not only do we have to be sure that any new way of working brings benefits, we have to be able to reassure our JV partners that the people doing the work have the right level of experience, and that there are no conflicts of interest."

After tendering for the provision of consultancy services for the upstream business, BP selected Aon's Global Risk Consulting team (AGRC) as its service provider.

"AGRC's people had the upstream industry experience that we needed, and they were able to demonstrate that clear boundaries would exist between their work as Risk Management Consultants and the brokering side of Aon's business, avoiding any potential conflicts of interest when it came to buying insurance cover," Daniel says. "Both of those were crucial. At the end of the day, we are still accountable to our JV partners, even though the Aon Global Risk Consulting team is working with our JV partners day to day."

AON BUILDS UPON A SOLID INFRASTRUCTURE

Aon's Bob Choppen, who leads the AGRC team, planned the transition to the new model carefully. "It was really important that the handover went smoothly," he says. "That sets the tone, and gives people the confidence that it will really work. Dealing with so many Joint Venture partners means that we have a large number of stakeholders, so we were keen to ensure they all knew what was happening and what to expect."

The changes made by the AGRC team have had a positive impact. "The good thing for our people," says Anderson, "is that they are now much more able to take a leading role in our new project work, which is about building the business for the future. That's a great place for our people to be working—it's high profile, it can be more challenging, and it offers additional development opportunities."