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18 July 2024

Oil firms warned of under-insurance

By Staff Writer



Marsh, the world’s leading insurance broker and risk adviser, yesterday warned oil companies of the risk of under-insurance as world oil prices reach record highs.

Website AMEinfo.com quoted Andrew George, Managing Director, speaking in advance of Marsh’s National Oil Companies Conference to be held next week: “An increase in activity in the oil sector means that any major loss will cost more than ever to replace.
In recent years there have been many more projects commissioned, such as offshore infrastructure including rigs and platforms, refineries and petrochemical plants, which may have been less viable with lower oil prices.
This increase in demand, which has shown little sign of abatement in the Middle and Far East, directly impacts replacement values and project lead times.

“While many clients are actively addressing this issue, many remain significantly under-insured. With triple-digit percentage increases in replacement value now common, oil companies need to address their strategy for managing risk, including their insurance limits, to ensure that a major incident does not become a needless financial burden.

“Additionally, as the demand for commodities has increased, lead times for replacements have also increased. Oil companies also need to ensure that their business interruption insurance policies and contingency plans reflect the latest market developments.

Today, rebuild times for major plants that may have been 24 months could be 36 to 48 months or more.”

The conference will be held on February 26 and February 27 in Dubai.