Posted on Jun 24, 2010 by Sergio Ulloa
According to a recent statement by CEO Richard Ward, Lloyd's anticipates that the premiums for insuring offshore drilling will go up "quite significantly" as a direct result of the BP oil spill in the Gulf of Mexico. Mr Ward acknowledged that in the past, rates for this type of operation in that area had fallen to a very low level, and fellow players in the industry had been questioning for quite some time the profitability of insurance in that particular region.
As a consequence of the Deepwater Horizon rig explosion back in April, insurers started to charge 50 percent more for policies covering oil rigs. Insurers of Lloyd's are expected to pay between US$300 million (EUR 242.9 million) and US$600 million (EUR 485.8 million) in claims related to the explosion of the rig.
The rig, owned by Transocean, was insured by Lloyd's underwriters and has coverage caps for environmental damage caused by the spill.
Insofar, BP has spent more than US$2 billion (EUR 1.6 billion) responding to the disaster and has set aside US$20 billion (EUR 16 billion) in escrow as per forecast by the US government, to settle future claims since BP didn't buy insurance.
In a move aimed at limiting exposure, Lloyd's underwriters have initiated legal action in the US by suing BP, asking the presiding judge to declare that they have no obligation to cover the liability related to the pollution resulting from the spill because a clause in the contract between BP and Transocean that stipulates that the rig owner would not be responsible for contamination originating below the water surface.
A pretrial conference in Houston, Texas USA has been set for 09 September.
Insurance Company mentioned:
Lloyd's is the world's leading specialist insurance market and occupies fifth place in terms of global reinsurance premium income, and is the second largest surplus lines insurer in the US. In 2009, 74 syndicates are underwriting insurance at Lloyd's, covering all classes of business from more than 200 countries and territories worldwide. Lloyd's is regulated by the Financial Service Authority.