The situation worldwide is proving that instability doesn’t seem to have any intention of disappearing.
While oil insurance has always been a form of coverage in which payouts for claims have traditionally been quite high, the risks associated with that protection are continuing to rise as instability throughout the globe – particularly in drilling countries – increases or refuses to settle.
The crisis currently underway in Ukraine is only one reminder of the dangers that are occurring.
When it comes to the areas in the world in which companies are most likely to drill, many are among the most volatile locations on the planet. This truth means that those same companies are being required to have to protect themselves with greater amounts of oil insurance – a coverage that is far from cheap, but that is considered exceptionally necessary. Prospecting for crude in places such as Nigeria, Iraq, and Venezuela can prove to be wildly profitable, but only if the equally high risks are properly mitigated.
The situation in oil insurance is only one of many points that are showing that the risks in the world are rising.
According to the president of Clements Worldwide, Chris Beck, “While there’s a lot going on in the U.S., the new exploration is all occurring in the most challenging countries and most high-hazard environments out there.” That organization is an insurer that sells policies to global energy companies. Beck went on to explain that “The reality of a lot of those countries is there a tremendous amount of economic instability and inequality.”
He also pointed out that Russia likely has every intention to try to recreate the power that it formerly held within that region of the world. The impact of that, said Beck, will be a “destabilizing” one, on several other nations in central Asia and in Eastern Europe.
Though it is practically traditional for oil producing countries to experience uncertainty on the political front, according to Beck, the actual disasters surrounding that industry can come from nearly anywhere. Oil insurance must protect against everything from a Middle Eastern pipeline explosion to a hijacked tanker off Africa’s coast. Now, even cyber terrorism is starting to become a real threat.