Lloyd's warns that offshore drilling insurance prices will have to go up 'quite significantly'

Lloyd’s chief executive Richard Ward says the BP oil spill will push up the price of insurance on offshore drilling. “Rates have to go up quite significantly. Rates had fallen to quite a low level in the Gulf of Mexico for offshore energy. We’d been questioning the profitability of insurance in that region for quite some time.”

Lloyd’s estimates its insurers will pay $300m-$600m (£200m-£400m) in claims related to the Deepwater Horizon rig. Lloyd’s underwriters insured the rig, owned by Transocean, and has caps on the coverage it provided for environmental damage caused by the spill. BP did not buy insurance and will cover the majority of the costs, forecast to be at least $20bn.

Lloyd’s underwriters are suing BP, asking a judge to declare that they have no obligation to cover pollution-related liability claims resulting from the spill. They argue contracts between

BP and Transocean stipulated that the rig owner would not be responsible for contamination below the surface. A pre-trial conference will take place in Houston, Texas, on 9 September.