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Home / Insurance / Offshore operators face large Ida losses when insurers trim coverage

Offshore operators face large Ida losses when insurers trim coverage



(Reuters) – Offshore energy companies are likely to suffer greater financial losses from Hurricane Ida than from previous storms in the Gulf of Mexico, due to reduced coverage offered by insurance companies, risk models Risk Management Services Inc. said Thursday. [19659002] Ida, one of the most powerful hurricanes to ever hit the area, hit Louisiana more than a week ago before moving northeast, causing intense flooding that killed dozens.

The damage to US offshore oil and gas production makes it one of the most costly for the energy sector since back-to-back hurricanes Katrina and Rita in 2005 reduced production for several months.

Insured losses for offshore platforms, rigs and pipelines are estimated at between 700 million and 1

.5 billion dollars, according to industry experts.

It is significantly below $ 2 to $ 3 billion of insured losses suffered by operators during Hurricane Katrina in 2005, estimated by the Insurance Information Institute.

RMS said, however, the current figures underestimate the extent of the total damage caused by Ida because the insurance companies have reduced the coverage of offshore assets in the region since Katrina and other major hurricanes such as Ike 2008.

"Offshore energy coverage is quite limited, with stricter policy formulation, stricter limits for physical harm ", says Rajkiran Vojjala, Vice President, Model Development, at RMS.

Most insurance contracts have also reduced the price per barrel of alleged business interruptions, he said. [19659002] Longer repair times caused by extreme damage to Port Fourchon and other places in the bay that serve as offshore crews' pitches will also increase the costs that operators will have to incur themselves.

Ten days after Ida's landing, 77% of oil production remains closed, compared to 70% after Ike in 2008, 60% after Katrina in 2005 and 10% after Laura in 2020, according to RMS.

In total, RMS estimates the US insured energy losses from m Ida in the Gulf of Mexico between $ 25 billion and $ 35 billion.

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