Insurers Raise Premiums On Drilling Platforms
As a blogger for an Insurance School I was waiting to see when Insurers for Off-Sea Drilling would increase their premiums. The Wall Street Journal has revealed that premiums have now risen 15 to 50 percent . The insurance on the rig by itself costs 2 to nine million a year to insure. It’s been reported that the destruction of the rig will payout half a billion dollars .
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The two to 9 million dollars paid for insurance does not include any liability losses . BP has paid separately for that kind of coverage . That coverage has insurers scrambling . The insurance was meant to cover financial losses due to hurricanes and loss of life on the platform . Now they are focused on the damages oil can do to the environment and the crippling effect on seashore industries . BP is already being sued by fishing boats for loss of business.
Congress is still unable to raise the cap on liability on Oil disasters . Currently its under 100 million . This oil-spill is going to cost billions in clean-up . A lot of the insurer’s effort will be spent in defending against lawsuits .
Ican only imagine that the premiums will continue to increase each month as the true cost of the spill become clearer . The insurers of this catastophe are now in a tough position. When they first insured the rig , they felt like they were insuring a regular business like a restaurant . Then one day they discovered they were in a situation where the restaurant poisoned half the country . The costs became unimaginable. (And Insurers have good imaginations. Worst case scenarios are their job .)
The political climate on the environment has changed dramatically in the last fifteen years. Today the environment is something to saved , not to be used . This perspective has leaders putting the blame on oil companies for their messes and Obama wants British Petroleum to shoulder cleanup alone . If this is Washinton’s tone , then insurance companies must face the reality that government isn’t a partner but an enforcer . Premiums will rocket skyward and the only question is how high? .
Rick Sabian
Top Insurance School offers nationwide Insurance and Securities pre-licensing as well as CE.
