The Alphabet of Insurance Coverage in Oil Spill Losses

Daniel W. Gerber

Kurt FalkLinda D. Kornfeld

James R. Pierce, Jr.

How will the Insurance Industry React? Impact on the upstream

Insurance Market Impact on the Excess

Liability Market Catastrophe Coverage

wake-up call

The Effect of Caps and Legislation OPA '90 Coverage - an

illusion? Can the industry

absorb a larger liability cap?

4

Insured catastrophe losses 1970–2009

USD bn, at 2009 prices

Source: Swiss Re, sigma No 1/2010, Figure 3

2005: Hurricanes

Katrina, Rita, Wilma

2008: Hurricanes

Ike,Gustav

2001:Attack on WTC

1999:Winter storm

Lothar

1992: Hurricane Andrew

1994: Northridg

e EQ

2004:Hurricanes

Ivan, Charley, Frances

Ocean Drive, FL, 2000

Ocean Drive, FL, 1926increased insurance

penetration

more values

more values in high-risk areas

higher vulnerability

climate change (storm,flood)

Underwriting consequences

Will risk assessment and due diligence from insurers on exploration and production activities (not only offshore) increase further?

Will the industry be looking towards broader conditions and larger coverage limits?

Claims assessing and handling

- What coverages are triggered?- What types of claims are likely?- Claimants will want to and need

to receive support quickly and non-bureaucratically.

- Will the analysis of coverages, extensions of coverages and exclusions be reviewed and defined rigorously going forward?

- What about fraud?- How well will nature be able to

cope with the oil spill, do we understand the abilities nature has?

Coverage Maze

Pollution exclusion Is crude oil (or a

dispersant) a pollutant?

Economic loss issues Coverage for nuisance

claims Time Element

Coverages

Time Element Coverages Business Interruption (Business Income) Contingent Business Interruption Order of Civil Authority Ingress/Egress Extra Expense

Insurance Industry Reactions

- Technical viability for future business will be taken.

- What other means does the industry have to help in insuring against possible future loss?

- Will the insurance industry will assess changes for its own benefit?

- Will contract certainty be an issue?

Where will the future take us?

Questions?

The Alphabet of Insurance Coverage in Oil Spill Losses

Daniel W. Gerber,

Kurt Falk, Linda D. Kornfeld, James R. Pierce, Jr.