Deepwater Horizon losses hit insurers, reinsurers
Insurers and reinsurers are likely take a hard look at the assumptions used to price property and liability coverages for drilling platforms in the wake of the Deepwater Horizon loss, said Moody’s Investors Service in a new report.
Property pricing has already responded to the event with premiums that are 15%-25% higher for rigs operating in shallow waters and up to 50% higher for deepwater rigs, the report said.
With the 2010 hurricane season now underway, any additional offshore energy losses in the Gulf of Mexico this year could further bolster pricing for these risks.
"We believe that this event will have a meaningful impact on the market for offshore energy-related insurance coverages," said James Eck, Vice President – Senior Credit Officer at Moody’s.
"Pricing for offshore energy liability insurance will likely also trend higher as insurers and reinsurers take stock of their losses and reevaluate the complex risks associated with drilling in deep waters."
Total insured losses from the explosion of the Deepwater Horizon drilling rig are currently estimated to be between $1.4 billion and $3.5 billion, the report said. Claims are likely to come from a number of lines, including: marine hull, marine liability, general liability, environmental/pollution liability, control of well, business interruption, D&O liability and workers’ compensation.
"Potential business interruption claims represent the largest unknown for insurers," said Eck, "and pollution damage along the coastline could push industry insured losses toward the upper end of the current estimated range."
The full report, "Deepwater Horizon Losses Sting Insurers and Reinsurers as Hurricane Season Looms," is available at www.moodys.com.
