Offshore insurance underwriting is facing some changes resulting from the Macondo incident.
According to Michelle Dennis, the director of business development for Bowen, Miclette & Britt, the full effect on the rates will not be fully known until after January 1st. Bowen also feels that companies can revisit their safety and risk management programs. Doing so will help their brokers appeal for lower rates when the time comes.
Insurance policies will also be written differently because of the Deepwater Horizon accident. The insurance industry needs to see if their contracts will hold up in the current lawsuits before they will have more knowledge of how new coverage, policy verbiage and the rates will be in the future. Insurance company’s rates are based on what they anticipate to cover, but the courts will determine how the coverage will apply.
After the Macondo incident, insurers put limits and capacity on offshore insurance premiums until they have a better idea of how the situation was going to be resolved. After the BP blowout in the Gulf, insurance rates increased about 30 percent for support and production services. The rates for drillers increased 100 percent. Before the incident, offshore rates were falling by about 10 to 15 percent.
Since the standstill in the Gulf, the government has mandated a $75 million liability cap for offshore accounts. Congress is also considering 3 options: a $10 billion limit, a $20 billion limit and no limit. Since the insurance companies have no way to provide an unlimited policy, they are pushing for another option. As of now, there hasn’t been an insurer that has decided to provide a $10 billion cap.