While the disastrous ecological impacts of the Deepwater Horizon leak are apparent, the longer-term impact of the spill on the insurance industry is now coming to light.
A new report from New York-based Moody's Investors Service concludes insurers and reinsurers are apt to reassess the metrics used to price property and liability coverages for drilling platforms in the wake of the catastrophe.
Moody’s notes that property premiums have risen 15% to 25% for rigs operating in shallow waters, and have shot up to 50% higher for deepwater rigs. What’s more, with the 2010 hurricane season now underway, any additional offshore energy losses in the Gulf of Mexico this year could also raise rates.
"We believe that this event will have a meaningful impact on the market for offshore energy-related insurance coverages," James Eck, VP-senior credit officer for Moody's, said in a statement. "Pricing for offshore energy liability insurance will likely also trend higher as insurers and reinsurers take stock of their losses and reevaluate the complex risks associated with drilling in deep waters."
The report estimates total insured losses from the explosion of the drilling rig to be between $1.4 billion and $3.5 billion, with claims are emanating from a number of lines, including: marine hull, marine liability, general liability, environmental/pollution liability, control of well, business interruption, D&O liability and workers' compensation.
"Potential business interruption claims represent the largest unknown for insurers, and pollution damage along the coastline could push industry insured losses toward the upper end of the current estimated range," Eck said.
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