aon’s 11 th energy insurance training seminar
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Aon’s 11 th Energy Insurance Training Seminar. Onshore & Offshore Liabilities David Sayer. Why Purchase Liability Insurance?. Statutory Obligation e.g. motor, employer’s liability Contractual obligation Protection of the Balance Sheet - PowerPoint PPT PresentationTRANSCRIPT
Aon’s 11th Energy Insurance Training Seminar
Onshore & Offshore Liabilities
David Sayer
2
Why Purchase Liability Insurance?
• Statutory Obligation e.g. motor, employer’s liability
• Contractual obligation
• Protection of the Balance Sheet
Regardless, the company should act as if uninsured and adopt risk control
and risk management procedures
3
Is the risk overstated ?
• Since 1997 in Europe only :• > 32 Major Accidents in commercial and transport activities within the Oil industry*• > 24 Major Accidents in Oil Refineries*
• Types of accidents :• > Leaks from valves / faulty joints / pumps failures• > Overspills• > Corrosion defects / tightness defect• > Bulk storage collapse• > Pipeline burst• > Fire and Explosion
All resulting in pollution from crude oil or refined products, but also from foaming agents
4
Operators Normal Responsibilities
• Own employees - Employers Liability, WCA
• Production Unit, Physical Damage, Removal of Wreck (Platforms, FPSO)
• Control of Well
• Pollution from the Wells and owned Property
• Liability to Third Parties
5
Contractors Normal Responsibilities
• Own employees - Employers Liability, WCA
• Drilling Vessel Physical Damage, Removal of Wreck, Protection &
Indemnity
• Pollution from the vessel (not the well)
• Liability to Third Parties
• Liabilities arising of Gross Negligence or Willful Misconduct
6
Operator / Contractor relationship
• Liabilities between Operators and Contractors are normally
defined in the contract. For example:
– Indemnities for people
– Indemnities for property
– Indemnities for Control of Well
– Indemnities for Removal of Wreck
– Indemnities for Pollution
7
Upstream Oil Company
Upstream
• Exploration / Production
• Pipelines to Refinery
8
Deep Water Horizon—Gulf of Mexico
The numbers:• Release of oil between April 20 and
July 13, 2010• Between 25,000 and 30,000 bbls
released daily• 19,000 personnel deployed • Over 1,000 vessels on site • 1.9 million feet of boom deployed • Over 19,000 claims filed• Over $8 Billion spent over 1st 4
months• BP establishing a $20 Billion
Trust to pay claims• Cost estimated at $40 billion• Dividend suspended• Share price collapse • CEO replaced
9
Risk Assessment
Exploration/ Production
• Operating area
• Revenues / throughput
• Number of Employees / wage bill
• Number of Contractors and who
• Number of Wells
• Depth of Wells
• Contingency Plan/Disaster Plan
• Contractual Agreements
• Claims Record
• Methodology and experience ( differentiation )
• P&I entry ( special opps extention )
• OIL entry ?
10
Downstream Oil Company
Downstream
• Refining
• Terminal / Storage Operations
• Pipelines / Transportation & Distribution
• Products
11
Fuel Terminal—Bayamon, Puerto Rico
An explosion of 11 fuel tanks at a fuel storage complex which shook the ground of Bayamon, a municipality near San Juan, with the force of a 2.8 magnitude earthquake caused the
evacuation of about 1,500 residents, school closings and class actions suits.
12
Tank Farm Fire - India
13
2005 : Buncefield - UKExplosion and fire at a tank farm outside
London
14
2005 : Kallo - Belgium
15
2009 : Plaine de la Crau - France
Underground pipeline burst in Natura 2000 protected site
4000m3 – 5ha- +$25M claim
16
Star Terminal—Suburban Washington DC
A petroleum leak from the Pickett Road Tank Farm on a nearby site contaminated the 1,500-home community : Cost in excess of US$ 250m
17
Risk Assessment
Refining and petrochemicals
• Proximity of the public
• Proximity of neighbours premises ( surrounding third party )
• Potential for escape of hazard e.g. Vapour Cloud Release / Pollution Hazard
• Presence of third parties at the site e.g. Contractors / Vessels ( Terminals )
• Measurement of Activity, Turnover or Throughout
• Nature of operations e.g. Refining, Petrochems, Terminals
• Products Exposures
• Moral Hazard – Risk Management and quality of risk in general.
• Surveys
• Capex ( capital expenditure on betterment / maintenance )
• Details on any construction activity to be insured or otherwise
• Claim History
•
18
Risk Assessment
Transportation
• Type Road / Rail / Vessel / Pipeline
• Size of Vessels / Pipelines / number of wagons / road tankers
• Frequency
• Distance
• Type of Product being transported
• Contractual Arrangements
• Surveys including details on pigging / scada protection.
• Claims Record
19
Risk Assessment
Products
• Type
• Turnover / volumes
• Export markets
• Contractual Sales Agreement
• Claims Record
20
Types Of Liability Policy
• Public Liability / Commercial General Liability
• Products Liability
• S & A Pollution Liability
• Environmental liability ( European directive 2004/35/ec)
• Employers Liability
• Professional Indemnity
• Directors & Officers Liability
• Motor Liability
• Aviation Liability
• Marine Liability
• P & I
21
What will a Liability policy not normally cover
Exclusions
• War / Nuclear
• Damage to own Property or Property in CCC unless by extension.
• Punitive / Exemplary Damages unless by extension ( limited markets )
• Gradual Pollution
• Products Guarantee / Recall
• Damage to Product itself
• Contractual liability other than for liability that would attach at tort ( ie in
absence of the contract ).
• Statutory Motor
• Workmens compensation schemes ( strict liability )
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A Liability Insurance programme
Marine&
Aviation
ComprehensiveGeneralLiabilityUpstream
PublicLiability
Down-stream
EmployersLiability
/Workers
CompensationAct
AutoTerminalOperators
UMBRELLAExcess
Difference in Conditions
23
Adequacy of Limits of indemnity
24
What can the insurance market offer :US$ 2,500 m ?
• Lloyd’s ( US$ 500m ++)– Marine syndicates– Non-Marine syndicates– Combined
• Companies ( US$ 750m ++ ) – UK– Continental Europe– USA– Rest of the World
• Bermuda ( US$ 750m ) – OCIL / OIL (Oil Casualty Insurance Ltd & EIM ( Energy Insurance Mutual)– XL, ACE, STAR EXCESS
• Others ( US$ 1bn) – Berkshire Hathaway.
2525
Can you Ignore the Risks
Questions ?