aon’s 11 th energy insurance training seminar
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Aon’s 11 th Energy Insurance Training Seminar. OIL 1 – Coverage and Blending with Market Programmes Balint Pinter & Mike Parry. OIL – Oil Insurance Limited. OIL insures physical damage to property, well control and 3rd party pollution liability 52 member companies (as at July 2011) - PowerPoint PPT PresentationTRANSCRIPT
OIL1 – Coverage and Blending with Market
Programmes
Balint Pinter & Mike Parry
Aon’s 11th Energy Insurance Training Seminar
OIL – Oil Insurance Limited
• OIL insures physical damage to property, well control and 3rd party pollution liability
– 52 member companies (as at July 2011)
• One of the broadest policy forms currently available
• OIL’s policyholders are also shareholders, who have energy operations.
• The Company commenced operations on January 1, 1971 with 16 shareholders– at a time when the Commercial Market Ceased to Provide
adequate coverages and big enough limits
• Low-cost provider as rates based on pure loss cost– Critical mass to achieve spread of risk and financial strength/stability.
• Provides hedge against a frequently volatile commercial insurance market– Generates long-term benefits for shareholders– Unique loss recovery mechanism
Advantages
Mutual – “owned” by its members
Global cover in all terrritories - no OFAC problems
Profit not main driving force e.g. lower cost of capital
Dividends may be returned to policyholders directly or as rate subsidies
Ability to provided “non – standard” covers e.g. pollution, terrorism
No sub-limits for Natural Catastrophe (Earthquake)
No differential for members with a bad loss record
Disadvantages
No differential for members with a good loss record
Long term pool share obligation including exposure to GOM Wind
Cost of withdrawal dependent on historic pool performance
Total Withdrawal premium system
OIL – Advantages and Disadvantages
OIL - Risks Insured vs. Excluded
Risks Insured
Physical Damage• Replacement Cost Value
• Actual Cash Value
Well control, including restoration and redrilling
Construction
Terrorism
Pollution Liability• Non gradual (sudden & acc.)
• 40/120 days
Cargo
Risks Excluded
Land, War, Nuclear
Business Interruption
Tanker Pollution Liability (except Charterer’s Liability)
Products Liability
Commercial Waste Disposal
Transmission & Distribution(above ground)
OIL’s Mutual Structure
• Basic structure similar to any other corporations:
– Shareholders, Board of Directors, Executive Committee, Officers & Staff
• Major differences:
– Shareholders are the customers (Insureds)
– Directors are elected from shareholder body
• Investment companies directed by a separate board, which includes senior financial officers from major shareholder companies.
• No underwriting per se - each policyholder treated equitably.
• All shareholders pay same rate.
• One standard policy form for all shareholders.
Claims Advised
Claims Filed
Gross For Interest
Net to OIL Net to OIL
Scaled
Andrew(1992)
3 3 $127M $108M $108M
Lili(2002)
7 6 $147M $96M $96M
Ivan(2004)
10 8 $815M $585M $585M
Katrina(2005)
25 18 $4,822M $2,165M $1,000M
Rita(2005)
27 20 $2,877M $1,491M $1,000M
Ike(2008)
12 11 $1,925M $895M $750M
Total: 84 66 $10,713M $5,340M $3,539M
Historical Hurricane Losses
Hurricanes - Past Payout Patterns
Years Hurricane Andrew (1992)
Hurricane Lili
(2002)
Hurricane Ivan (2004)
Hurricane Katrina (2005)*
Hurricane Rita (2005)*
< 1 Year 18% 0% 9% 5% 2%
< 2 Years 79% 81% 78% 42% 20%
< 3 Years 100% 97% 79% 56% 35%
> 3 Years 100% 99% 90% 69% 52%
Total $108M $96M $585M $1,000M $1,000M
Members 3 6 8 18 20
*Payments Scaled for Aggregation Limit
How do I join OIL? - Eligibility Criteria
• Energy Company must have at least 50% of either (1) Gross Assets or (2) Annual Gross Revenues derived from “Energy Operations¹”.
• A minimum of $1 Billion of Gross Assets (PP&E and book value of Inventories).
• A minimum credit rating of either “BBB-” (S&P) or “Baa3” (Moody’s).
• Companies without external credit ratings can obtain a “shadow rating” or will be subject to financial analysis by OIL staff and may be required to post acceptable security.
• 1) As defined in the OIL Shareholders’ Agreement.
Eligibility Criteria (Cont’d)• Acceptable 10-year loss history.
• Business operations that represent an appropriate spread of risk
and “fit” within a mutual framework.
• Demonstrated track record of maintaining world-class health,
environment and safety standards.
• All applications must be approved by OIL Management.
• Members whose credit rating falls below established minimum
criteria must post security.
OIL Members – as at July 2011
EUROPE UNITED STATES UNITED STATES (cont.)Arkema Inc Amerada Hess Corporation Motiva Enterprises LLCLyondellBasell NV Apache Corporation Murphy Oil CorporationBASF Chevron Phillips Chemical Company LLC Noble Energy IncBG Group plc Chevron Corporation Occidental Petroleum CorporationYara CITGO Petroleum Corporation PREPACEPSA ConocoPhillips Petroleum Company Sempra EnergyDONG Drummond Company Inc. Sinclair Oil CorporationEdF DTE Energy Southern Union CompanyE.N.I. S.p.A. El Paso Corporation Sunoco, Inc.Galp Energia S.A. Forest Oil Corporation Tesoro Petroleum CorporationMOL Reinsurance Company Limited LOOP LLC Valero Energy CorporationOMV Aktiengesellschaft Lyondell Chemical Company Westlake-Titan GroupRepsol YPF, S.A. Marathon Oil Company XTO IncRoyal Vopak Mariner Energy Inc.Statoil ASA BuckeyeTOTALFINAELF Williams Companies
OIL Membership byHeadquarter Location
Caribbean2%
Far East/Australasia
5%
Europe30%
Canada14%
USA49%
Number of Shareholders @ 01 July 11 = 52
Membership “Count” by Industry Segment
0 2 4 6 8 10 12 14 16
Electric Utility
Integrated Oil
R&M
E&P
Chemicals
Pipelines
Other
Mining
Standard Premium
-$150MM
Limit
Retroor
Flat Premium
-$100MM
Limit
Policyholder Deductible
100% coverage from OIL
Programme option - Limit Structures
Standard Premium
-$150MM
Limit
Self Insuredor
Com’l MktPlacement
Policyholder Deductible
60% coverage from OIL
Limit Structures
Standard Premium
-$150MM
Limit
Retroor
FlatPremium
-$100MM
Limit
Commercialor
Self Insured-
$500MMLimit
Policyholder Deductible
$250MM Part of $750MM
Limit Structures
Net Incurred Losses since 1972 by Geographic Region of Physical Loss
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
Expressed in millions of U.S. dollars* untrended
OIL Historical Losses since 1972by Industry Sector
Other10%Petrochemicals
10%
Refining & Marketing
27%
Offshore E&P47%
Onshore E&P6%
Unmodified Gross Assets by Business Sector
ANWS Onshore7%
Pipelines6%
Utilites14%
Onshore E&P21%
Other2%
Mining 2%
ANWS Offshore3%
R&M/Chemicals
21%
Offshore E&P23%
Total Unmodified Gross Assets @ 01-Jan 2011 = >$2BN*
* Pharmaceutical assets represent .01%
Other 3%
Weighted Gross Assets by Business Sector
R&M Chemical23%
E&P Offshore21%
ANWS Offshore
32%
ANWS Onshore
5%
E&P Onshore8%
Pipelines1%
Mining3%
Utilities5%
Other2%
Other2%
Utilities6%
Mining4%
Pipelines1%
E&P Onshore10%
ANWS Onshore
10%
ANWS Offshore
20%
E&P Offshore19%
R&M Chemical28%
WGA by Industry SegmentWGA by Industry Segment
*Total WGA $1,082B *Total WGA $1,308B
OIL
QUESTIONS ?
Aon’s 11th Energy Insurance Training Seminar