New opportunities for insurers as drilling operations move abroad - Rutherford

The oil and gas industry is a growing business and insurers are moving to take advantage of the opportunities this presents.

ACE European Group branch manager in Aberdeen Jim Rutherford said being in the heart of the UK’s oil and gas industry will help the insurer take advantage of the lucrative market and aid the growth of local brokers.

Talking to Insurance Times before the ACE Broker Clinic, Rutherford said: “We want to be part of the business community here in Aberdeen. We are always going to be a broker-only business so being situated here will allow us to help local and national brokers grow.”

Brodies LLP partner Finlay Crossan is a specialist lawyer in the oil and gas field and he says the industry affects every part of life in Aberdeen. He said: “Everything in Aberdeen is related to the oil and gas industry in some way. The majority of employment must derive from the industry.”

This reliance on the industry means that local businesses have thrived at a time when other regions of the country are struggling as a result of the economic crisis. This has led to insurers like ACE benefitting from the increased insurance needs of its clients.

“The real business opportunity is the growing business sector,” Rutherford said. “We see almost every client grow substantially year-on-year.”

International reach

Rutherford also said that the local expertise developed in Aberdeen means that exploration and production (E&P) companies are well placed to take advantage of drilling in new regions that have previously been too dangerous or remote to extract from.

As a result, Scottish companies based in Aberdeen have begun operating internationally.

This expansion into new regions of the globe is a result of more established wells drying up. The difficulties that this regional expansion presents for insurers means that ACE is always developing new products.

“We recently produced our latest set of wordings which develops the nuances contained in them,” Rutherford said. “We have created international specific oil and gas wordings for UK companies setting up as overseas domiciled subsidiaries.”

A risky business

Crossan said that this shift of focus to foreign operations also means that smaller businesses are beginning to operate in Aberdeen and this presents its own problems for insurers.

“There are always new risks arising as oil and gas reserves become more difficult to reach,” he said. “In the UK continental shelf, major E&P companies are moving from depleted reserves to larger developments in the UK and elsewhere. Smaller E&P companies and international state-backed companies are coming in with different attitudes to risk.”

Rutherford believes the ability of ACE to manage these complexities and keep their policies relevant means the insurer is placed well to benefit from this new growth phase in oil and gas.

“As we continue to develop expertise in an area where other insurers dare to tread then we will get a better return on our investments,” he said.