Offshore premiums soar after BP spill

Reinsurers have hiked up premiums for offshore energy by 50% as the insurance industry faces losses of up to $3.5bn (£2.4bn) from the BP oil spill, Moody’s reports.

Early evaluations indicate a 15% to 25% increase in property coverages for rigs in shallow waters and up to 50% higher for deepwater rigs, Moody’s Investor Service has said.

The final bill for the BP spillage in the Gulf of Mexico is expected to be $1.4bn-$3.5bn, it reported. Swiss Re faces the heaviest loss, at $200m, followed by Munich Re, liable for $80m, PartnerRe, with a $65m payout, and Hanover Re, at $53m, Moody’s said. Lloyd’s has put its losses at $300m-$600m.

Vice-president and senior credit officer James Eck said: "With hurricane season approaching, any additional losses in the Gulf of Mexico this year could further bolster pricing for this sub-class. Likewise, pricing for offshore energy liability insurance is sure to get higher as insurers and reinsurers take stock of their losses.”

Insurers would have faced a greater bill if BP captive Jupiter had not taken on so much of the risk. Standard & Poor’s cut its outlook on BP’s Guernsey-based captive to negative from stable.

It said: “The outlook revision on Jupiter is not due to any changes to the standalone characteristics of the company despite the not-yet-quantified exposure. Jupiter has a $700m per occurrence limit.”