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Aon’s 11th Energy Insurance Training Seminar
OIL
1 – Coverage and Blending with Market
Programmes
Balint Pinter & Mike Parry
OIL – Oil Insurance Limited
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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
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OIL’s policyholders are also shareholders, who have energy operations.
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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
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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
OIL – Advantages and Disadvantages
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 - Risks Insured vs. Excluded
Risks Excluded
Risks Insured
Physical Damage
• Replacement Cost Value
• Actual Cash Value
Well control, including
restoration and redrilling
Land, War, Nuclear
Business Interruption
Pollution Liability
• Non gradual (sudden & acc.)
• 40/120 days
Commercial Waste Disposal
Terrorism
Products Liability
Construction
Cargo
Tanker Pollution Liability
(except Charterer’s Liability)
Transmission & Distribution
(above ground)
OIL’s Mutual Structure
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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.
Historical Hurricane Losses
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
Hurricanes - Past Payout Patterns
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
3
6
8
18
20
Years
Members
*Payments Scaled for Aggregation Limit
How do I join OIL? - Eligibility Criteria
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Energy Company must have at least 50% of either (1) Gross
Assets or (2) Annual Gross Revenues derived from “Energy
Operations¹”.
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A minimum of $1 Billion of Gross Assets (PP&E and book value
of Inventories).
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A minimum credit rating of either “BBB-” (S&P) or “Baa3”
(Moody’s).
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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.
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1) As defined in the OIL Shareholders’ Agreement.
Eligibility Criteria (Cont’d)
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Acceptable 10-year loss history.
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Business operations that represent an appropriate spread of
risk and “fit” within a mutual framework.
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Demonstrated track record of maintaining world-class health,
environment and safety standards.
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All applications must be approved by OIL Management.
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Members whose credit rating falls below established minimum
criteria must post security.
OIL Members – as at July 2011
EUROPE
Arkema Inc
LyondellBasell NV
BASF
BG Group plc
Yara
CEPSA
DONG
EdF
E.N.I. S.p.A.
Galp Energia S.A.
MOL Reinsurance Company Limited
OMV Aktiengesellschaft
Repsol YPF, S.A.
Royal Vopak
Statoil ASA
TOTALFINAELF
UNITED STATES
Amerada Hess Corporation
Apache Corporation
Chevron Phillips Chemical Company LLC
Chevron Corporation
CITGO Petroleum Corporation
ConocoPhillips Petroleum Company
Drummond Company Inc.
DTE Energy
El Paso Corporation
Forest Oil Corporation
LOOP LLC
Lyondell Chemical Company
Marathon Oil Company
Mariner Energy Inc.
Buckeye
Williams Companies
UNITED STATES (cont.)
Motiva Enterprises LLC
Murphy Oil Corporation
Noble Energy Inc
Occidental Petroleum Corporation
PREPA
Sempra Energy
Sinclair Oil Corporation
Southern Union Company
Sunoco, Inc.
Tesoro Petroleum Corporation
Valero Energy Corporation
Westlake-Titan Group
XTO Inc
OIL Membership by
Headquarter Location
Caribbean
2%
Far
East/Australasia
5%
USA
49%
Europe
30%
Canada
14%
Number of Shareholders @ 01 July 11 = 52
Membership “Count” by Industry Segment
Mining
Other
Pipelines
Chemicals
E&P
R&M
Integrated Oil
Electric Utility
0
2
4
6
8
10
12
14
16
Programme option - Limit Structures
100% coverage from OIL
Standard
Premium
$150MM
Limit
Retro
or
Flat
Premium
$100MM
Limit
Policyholder Deductible
Limit Structures
60% coverage from OIL
Standard
Premium
$150MM
Limit
Self Insured
or
Com’l Mkt
Placement
Policyholder Deductible
Limit Structures
$250MM Part of $750MM
Standard
Premium
$150MM
Limit
Retro
Commercial
or
or
Flat
Premium Self Insured
$500MM
$100MM
Limit
Limit
Policyholder Deductible
Net Incurred Losses since 1972
by Geographic Region of Physical Loss
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
s
Ar
er
O
th
No
r
th
Se
ea
a
o
G
ul
fo
fM
ex
ic
ad
a
Ca
n
ro
pe
Eu
US
A
$500
$0
Expressed in millions of U.S. dollars
* untrended
OIL Historical Losses since 1972
by Industry Sector
Petrochemicals
10%
Other
10%
Refining &
Marketing
27%
Onshore E&P
6%
Offshore E&P
47%
Unmodified Gross Assets by Business Sector
ANWS Offshore
3%
ANWS Onshore
7%
Mining
2%
Offshore E&P
23%
Pipelines
6%
R&M/
Chemicals
21%
Utilites
14%
Onshore E&P
21%
Total Unmodified Gross Assets
@ 01-Jan 2011 = >$2BN*
Other
3%
* Pharmaceutical assets represent .01%
Weighted Gross Assets by Business Sector
WGA by Industry Segment
WGA by Industry Segment
R&M Chemical
23%
R&M Chemical
28%
Other
2%
Utilities
6%
E&P Offshore
19%
Mining
4%
E&P Offshore
21%
Other
2%
Utilities
5%
Mining
3%
Pipelines
1%
Pipelines
1%
E&P Onshore
10%
ANWS
Onshore
10%
*Total WGA $1,082B
ANWS
Offshore
20%
E&P Onshore
8%
ANWS
Offshore
32%
ANWS
Onshore
5%
*Total WGA $1,308B
Aon’s 11th Energy Insurance Training Seminar
OIL
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