Reinsurers float $20b plan for BP-type blowout | The Daily Star
12:00 AM, September 15, 2010 / LAST MODIFIED: 12:00 AM, September 15, 2010

Reinsurers float $20b plan for BP-type blowout

A scheme floated here at an annual meeting of giants in the insurance industry could come up with a 20-billion-dollar insurance payout if an oil rig blows up, kills people and spreads pollution.
By comparison, British oil group BP estimates that the direct civil costs of dealing with the fatal explosion of its Deepwater Horizon rig in the Gulf of Mexico and ensuing pollution could amount to about 32 billion dollars (24.8 billion euros).
BP, in common with some other oil companies, had switched to insuring itself, on the basis that the insurance premiums saved would match any eventual disaster costs.
But as the pollution spread, and the potential liability looked like being almost limitless, there was even talk that BP might need state support to avert bankruptcy.
Now the crisis has passed and BP has survived, but the costs still mount. The BP drama is making oil giants reflect on their insurance strategies and whether to revamp there own mutual insurance fund.
It has also set the reinsurance industry thinking. Reinsurers take on part of big risks underwritten by front-line insurance companies which need to spread and thereby dilute their own exposure.
These two sides of the industry meet in September each year to negotiate the terms on which they will do business with each other next year.

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