Offshore Energy Insurance Costs to Increase ‘Modestly’

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 insurance brokerage giant Marsh.

Following Hurricane Katrina, the market experienced massive reductions in capacity and subsequent rate hikes. However, in its latest Energy Market Monitor, Marsh says 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, said that “many firms involved in offshore activities are reviewing their current insurance programs and are seeking to top up their cover. Some insurers have been capitalizing on their clients’ concerns and have been hiking up their prices for higher limits and deepwater drilling wells.”

Marsh recommends that firms 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.