Guy Carpenter looks at oil rig explosion, sinking
An explosion and large fire on an oil rig in the Gulf of Mexico left 11 workers missing and 17 others injured on April 20. The blaze on the Deepwater Horizon drilling rig sent flames and smoke high into the sky about 40 miles off the coast of Louisiana. A new report from Guy Carpenter outlines the numbers associated with the event.
According to Guy Carpenter, reports said the rig, which is owned by Transocean Ltd, was under contract to the oil giant BP at a cost of $533,000 a day and doing exploratory drilling. The rig was listing badly as it was consumed by flames and it eventually sunk on April 22, leaking oil into the Gulf of Mexico.
Reports said the rig was built in 2001 in South Korea at a cost of about $350 million.
Transocean has announced that the total insured value of the rig was $560 million and it has insurance to cover the total loss. According to Best’s Insurance News, Transocean’s annual report said a deductible ranging from $500,000 to $1.5 million would apply in the event of a total loss of a drilling unit.
Transocean’s filings also indicate a $10 million deductible on crew injury liability and a $5 million deductible on third-party non-crew claims, the report says. Transocean also carries $950 million in third-party liability coverage, the report said. Transocean retains the risk for any liability losses in excess of the $950 million limit.
According to sources quoted by Insurance Day, the incident is likely to produce a sizeable loss to the insurance industry, including some losses to Lloyd’s syndicates. Insurance Day added that QBE’s syndicate 1036 is reported to be the rig’s lead insurer. Munich Re and Hanover Re have also said they expect a claim from the explosion and fire. Hannover Re said the drilling rig will result in a major loss for Hannover Re, expected to be EUR 40 million or USD$52 million. “Therewith, we remain considerably below our major loss expectancy for the second quarter”, confirmed CEO Ulrich Wallin.
