Insurance costs to increase ‘modestly’ for offshore energy risks

Beijing, 28 July 2010 – Major losses sustained in the Gulf of Mexico will not have the same market-changing impact on the upstream energy insurance market as other major events such as Hurricane Katrina, according to a new report published by Marsh.  

Following Hurricane Katrina, the market experienced massive reductions in capacity and subsequent rate hikes. However, in its latest Energy Market Monitor, Marsh reports that while insurers have been unsettled by the Deepwater Horizon losses, capacity has not constricted and price increases are likely to be modest in other parts of the upstream energy market, unless more major losses occur.

Jim Pierce, Chairman of Marsh’s Global Energy Practice/Andrew George, Leader of Marsh’s Energy Practice in Europe, the Middle East and Africa/other local leader, commented: “The dramatic consequences of the Deepwater Horizon explosion, in terms of both loss of life and pollution, has undoubtedly changed sentiment among upstream energy underwriters.

“As a result of the incident, many firms involved in offshore activities are reviewing their current insurance programmes and are seeking to top up their cover. Some insurers have been capitalising on their clients’ concerns and have been hiking up their prices for higher limits and deepwater drilling wells, regardless of where they are located.

“The Transocean loss is an important event in the history of deepwater drilling and exploration insurance but not a market changer. Following Hurricane Katrina, there was a massive change in the insurance landscape due to a lack of capacity and changes to the way in which wind insurance was sold. Capacity currently isn’t an issue and insurers seem keen to maintain their commitment to the market. This is good news for the industry.”

Marsh recommends that firms affected by the Deepwater explosion should work with their legal counsel as a matter of urgency to review their potential exposures and identify the claims reporting and notification procedures across relevant insurance policies. This includes casualty, property, directors’ and officers’ and professional liability cover.

To obtain a copy of Marsh’s latest Energy Market Monitor, please visit: http://global.marsh.com/industry/energy/energyMarket

Companies can also stay updated on the latest risk and insurance developments arising from the Deepwater Horizon explosion at Marsh’s Emergency Disaster Recovery Portal.

Contact
Valen Lin
+8610 6533 4008
valen.lin@marsh.com

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About Marsh
Marsh has over 23,000 employees and provides advice and transactional capabilities to clients in over 100 countries. Marsh is a unit of Marsh & McLennan Companies (MMC), a global professional services firm with approximately 52,000 employees and annual revenue exceeding $10 billion. MMC also is the parent company of Guy Carpenter, the risk and reinsurance specialist; Kroll, the risk consulting firm; Mercer, the provider of HR and related financial advice and services; and Oliver Wyman, the management consultancy. MMC's stock (ticker symbol: MMC) is listed on the New York, Chicago and London stock exchanges. MMC's Web Site is www.mmc.com. Marsh’s Web site is www.marsh.com.