In the wake of the oil spill in the Gulf of Mexico, Munich Re has developed an insurance product covering oil companies against liability risks arising from offshore drilling operations.
Currently, drilling operations are insured under the individual liability policies of the disparate companies concerned. Munich Re says the proposed offering has the potential to create a unified policy of $10–20 billion per drilling operation in the international insurance market.
“If coverages are available, companies will buy them because inability to pay high compensation claims can lead to insolvency, and mere speculation about such an eventuality can hit their share price,” Munich Re Board member Torsten Jeworrek said in a statement.
Jeworrek said the coverage would only be feasible if a very large number of drilling operations are insured. This could be achieved, he added, either through a voluntary commitment on the part of the oil companies or by introducing some form of compulsory insurance in the licensing procedure. The company also considers the tightening of safety standards crucial to the concept.
“We stand by our commitment to the development of renewable energy,” Jeworrek said. “In the meantime, better risk management and financial protection are needed in the field of fossil fuel generation.”
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