Deepwater loss lacks Katrina’s impact – Marsh

Losses from the Deepwater Horizon oil rig disaster will not have the same impact on the upstream energy insurance market as other major events such as 2005’s Hurricane Katrina, according to a new report from insurance broker Marsh.

Marsh’s latest Energy Market Monitor report found 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. After Katrina, on the other hand, the market experienced large reductions in capacity and subsequent rate hikes.

“The Transocean loss is an important event in the history of deepwater drilling and exploration insurance but not a market changer,” said Andrew George, leader of Marsh’s energy practice in Europe, the Middle East and Africa. Capacity currently isn’t an issue and insurers seem keen to maintain their commitment to the market. This is good news for the industry.”

Nevertheless, George said the Deepwater loss has changed the sentiment of upstream energy underwriters. He pointed out that 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.”