Property coverage up 50% for deepwater rigs
The destruction of the Deepwater Horizon oil rig in April will have a “meaningful impact” on the market for offshore energy-related coverage as insurers and reinsurers count their losses from the event, according to a report from rating agency Moody’s.
Moody’s said early reports indicate property coverages are 15% to 20% higher for rigs operating in shallower waters and up to 50% higher for deepwater rigs. The rating agency added that any additional losses in the Gulf of Mexico from this year’s Atlantic hurricane season, which began on June 1, could push prices still higher.
Pricing for offshore energy liability is “sure to trend higher”, said Moody’s, as insurers and reinsurers take stock of their losses and re-evaluate the risks associated with drilling in deep waters.
Industry loss estimates from the destruction of the rig, which was positioned about 41 miles off the coast of Louisiana, and the resulting spill range from $1.4bn to $3.5bn. Moody’s pointed out that the cost to insurers would have been higher had BP, the majority owner of the Deepwater Horizon project, had bought liability insurance in the commercial market rather than self-insuring the risks through a captive programme.