Offshore energy insurance

Gulf of Mexico, April 20, 2010: the BP-operated Macondo well blows out beneath Transocean's Deepwater Horizon rig. Eleven dead, and about 65 billion dollars in charges for BP, most of it outside any policy. Offshore energy insurance covers fixed platforms, drilling units, FPSOs, subsea pipelines and installations under construction. It responds to physical damage, loss of production following physical damage, third-party and pollution liability, and control of well costs (OEE, Operator's Extra Expense), which pay for bringing a blowout back under control, redrilling and cleanup, usually on the operator's working interest in the joint venture. The blowout remains the benchmark loss because a single event hits every one of those covers. Control of well is the most technical part of upstream; support vessels stay with the marine hull market, and the P&I clubs carry liability for the mobile units they enter. It is a thin market that trades in London, on forms such as EED 8/86 for control of well and WELCAR 2001 for offshore construction. The oil majors pool their physical damage in OIL (Oil Insurance Limited), a Bermuda mutual, and place what sits above its capacity at Lloyd's and in the London energy market; several, BP first among them, keep a large share of the risk on their own balance sheet. The same market writes offshore wind farms, through construction and into operation.