Major losses in 2011 have resulted in extremely tough conditions, reduced capacity and increased pricing for energy insurance buyers in 2012. We caught up with Mark Oakley, leader of Willis Energy’s Houston team, at RIMS this week to discuss what this means for insurance buyers. You can watch the Willis Buzz video interview with him below, or on YouTube.
Oakley says that despite the fact that there were no hurricane losses in the Gulf of Mexico, there is now a lack of capacity and insurers are not offering reductions in wind rates.
Two Key Issues
Oakley discussed two major issues that are on the agenda for energy risk managers in the approach to renewals, namely foreign interest limits and indemnity awareness. With regards to foreign interest limits, Oakley said that in the past, energy companies could maintain the full limit for their share of a joint venture (JV), but that now insurance contracts for JVs have clauses that reduce limits to the percentage that the company owns in the JV. So for example, whereas before a firm could get $500mn in coverage for an off-shore oil rig, they’d only get $100mn today if they own 20% of the JV.
When it comes to ensuring indemnity, Oakley said that energy buyers are also closely scrutinizing contracts when they transfer risk to another company with regards to whether those contracts will be upheld in the future.