Energy Review 03-2017

24 March 2017

In the second week of March, the price of oil slumped to its biggest three-day loss in a year; investors continue to worry that OPEC-led production cuts have not yet reduced the global glut of crude. Since then there have been some massive discoveries of new oil fields, and the development of these, such as Repsol’s find in Alaska (the largest onshore discovery in 30 years), means that even more oil will enter the market – albeit in a few years’ time. If there is talk of too much oil entering the market then who is going to tell the oil companies to stop looking for more? And, even then, would they listen? On the contrary, the US is to open 73 million offshore acres for oil and gas exploration.

In fact, employment in the oil industry is on the increase and discoveries around the globe show that this trend is set to continue. Another consequence of large oil discoveries is the move such as Shell’s decision to move away from expensive oil extraction: it is selling its interests in Canada’s oil sands – to the dismay of local politicians.

A month ago we noted that global oil and gas discoveries had dropped to 70-year low; analysts were asking if the era of oil and gas megaprojects is over. How quickly can things change? Gas exploration and production has not experienced the same fluctuation as oil. Russia is seeking to produce more and more gas and is confident that Europe cannot survive without her. One of Japan’s largest companies, the general trading giant and business developer Mitsui & Company, has underlined the importance of a stable liquefied natural gas supply, rather than oil, in order to fulfil future energy demand in Japan.

Following rumours that Saudi Aramco could become a listed company, the world’s largest oil exporter has been fairly quiet. Then came the announcement that it intends to invest US$50 billion in renewable energy to generate ten gigawatts of wind and solar power by 2023. Data published by the International Energy Agency shows that fossil fuels (coal, natural gas and oil) supplied 81.1 percent of total global energy in 2014, down from 86.7 percent in 1973; this is a trend worth watching. Another statistic worth considering is that, between 2014 and 2040, growth in demand for fossil fuels will lag considerably behind renewables, with hydro leading the way by a large margin: oil growth 0.6 percent, hydro 15.2 percent.

While the energy world continues to be dynamic, the insurance world seems to be playing catch-up much of the time. In the UK, with Brexit looming, major London-based markets are looking at the best ways to cater for the possible changes when/if the Single Market closes its doors on Britain. AIG is planning on a continental headquarters in Luxembourg and within a month Lloyd’s is due to announce where its EU base will be. Many businesses in Britain are already looking at setting up subsidiaries in the EU to prepare for a “hard Brexit”, in which they would lose the right to sell goods and services across the bloc, and the insurance markets need to be there to respond to these needs.

After years of petitioning for the authorities to look at damage resulting from small earthquakes caused by gas drilling in the province of Groningen, a Dutch court has ruled that NAM, an energy company jointly owned by Shell and ExxonMobil, is liable for the psychological suffering of residents. Gas production has dropped significantly during the past year.

We also have news on piracy in the western Pacific and the Middle East.

In the meantime, as always, there have been plenty of moves with experts and executives juggling for positions and the main insurance markets seem ready for what the next few months have to offer.

We hope our readers find our articles interesting and look forward to any comments or questions which may arise.

Energy Casualties

Bombing halts pumping on Colombia’s Caño Limón oil pipeline

Pumping operations along Colombia’s second-most important oil pipeline, the Caño Limón–Coveñas, were halted due to a bomb attack by rebels from the Marxist ELN group, a police and a military official said on the 20th February.

Neither gave further details on the attack – the second in a week against the pipeline.

The attack occurred on the 19th February in a rural area of La Blanquita in central Boyacá province, state oil company Ecopetrol said in a statement. Production and exports from the Caño Limón fields were not interrupted.

The 485-mile (780-kilometre) pipeline has the capacity to transport up to 210,000 barrels of crude daily from oil fields operated by US-based Occidental Petroleum to the Caribbean port of Coveñas.

There were 43 attacks on the pipeline last year and 13 so far this year, according to Ecopetrol, which owns the pipeline.

Attacks on oil installations by ELN, a group of about 1,500 combatants, have been a frequent occurrence during a conflict which has killed more than 220,000 people and displaced millions over the past 52 years.

The attack comes as Colombian President Juan Manuel Santos’ government engages in peace talks with the rebels in Ecuador.

The Revolutionary Armed Forces of Colombia (FARC), the biggest rebel group in the South American country, agreed to a revised peace accord with the government late last year.

The Information Fusion Centre (IFC) publishes guidance on Sulu Sea attacks

The IFC in Singapore has released a commentary on the recent spate of attacks in the Sulu Sea, in particular, the Sibutu Passage.

Piracy in the Sulu Sea has temporarily halted international shipping to Polloc Port in Parang, Maguindanao, which is the main gateway for foreign trade in the Philippines’ Autonomous Region in Muslim Mindanao (ARMM), the Manila Times has reported.

A Vietnamese cargo ship – Giang Hai – was attacked by armed pirates in the Sulu Sea during the last week of February about 20 nautical miles north of Pearl Bank in Tawi-Tawi. Giang Hai was carrying 4,500t of cement to Polloc Port from Indonesia. One crewmember was killed and seven were abducted.

Polloc Port Manager Hexan Mabang said that this act of piracy caused several shipments of cement and other cargos to be suspended as shippers refused to charter vessels passing through the Sulu Sea headed for Polloc Port and other ports in Mindanao.

Haron Bandila of the ARMM Business Council noted that the main peace process involves the Moro Islamic Liberation Front based in Central Mindanao (whose leadership and forces are composed mostly of the Maguindanao tribe). But the Sulu Sea pirates are from the Sulu archipelago composed of the Tausug and other island tribes, quite separate from the Maguindanao’s.

The IFC reported that there were 33 incidents observed in the Sulu Sea over the last 12 months. Of these 33 incidents, 19 involved abductions.

Most of the attacks have been directed at smaller boats, such as tugboats and fishing vessels. However, two large merchant ships have also been attacked.

Although piracy appears to be on the increase in the Gulf of Guinea off Nigeria and the Sulu Sea, Canadian Commodore Haydn Edmundson has noted that piracy in international waters of the greater Middle East region has reduced significantly.

“Piracy was a really big issue several years ago, but there has been a notable reduction in the number of significant piracy events. The piracy situation in the region is definitely diminished,” said Cdr Edmundson, Commander of Combined Task Force 150 and Operation ARTEMIS, which is Canada’s contribution to maritime security and counterterrorism operations in the international waters of the greater Middle East region, including the Red Sea, Gulf of Aden, Arabian Sea and Gulf of Oman.

Cdr Edmundson also said that Canada has seen no indication of looted material from Syria and Iraq being smuggled through the international waters outside the Persian Gulf.

Explosion shuts segment of Kinder’s Tejas Pipeline in south Texas

At about 12:30 a.m. CST on the 15th February, Kinder Morgan, Inc. (KMI) discovered a natural gas release and fire on its Tejas pipeline system in a rural area of Refugio County, TX. The affected pipeline segment was shut down and company personnel were dispatched to the site, KMI said.

The fire was extinguished and there were no injuries.

Customer impacts were being assessed; regulatory agencies were notified and an investigation into the cause of the incident was being conducted, the company said. A spokesperson said that information about customer impacts may be available in due course.

KMI’s Tejas Pipeline is a full-service system with about 3,400 miles of pipeline. It includes a major intrastate pipeline system located primarily along the Texas Gulf Coast which transports, purchases and sells natural gas in the Texas intrastate market. Tejas also offers firm and interruptible sale, purchase, transportation and storage services.

Last year the Tejas Pipeline was affected by an incident occurring at the Energy Transfer Partners King Ranch gas processing plant in Kleberg County, TX.

Fatal explosion at Bai Hassan field

At least three people have been killed while seven others were injured when an oil tank exploded at the Bai Hassan oilfield on the 13th February.

A spokesperson for the North Oil Company (NOC) said the blast occurred during a welding operation.

Fire at Syncrude oil sands site extinguished after two days

The fire at Syncrude Canada’s oil sands plant in northern Alberta was extinguished on the morning of the 16th March, the company said in a statement, as parts of the mining and upgrading facility ran at reduced rates.

Syncrude said crews were still working to fully isolate the affected area of the Mildred Lake upgrader to allow safe entry to assess damage and develop a repair strategy. The upgrader processes mined bitumen into refinery-ready synthetic crude.

Other operations remained stable at the 350,000 barrel-per-day mining and upgrading facility, roughly 40 kilometres north of the oil sands hub of Fort McMurray.

Several upgrader units were shut down or running at reduced rates, while mining and extraction were being paced to balance lower bitumen demand, the company said.

Syncrude spokesman Will Gibson said he did not have details of the impact on production volumes.

The fire broke out on the afternoon of the Tuesday 14th March after a line failure caused a treated naphtha leak, prompting an evacuation of the Syncrude site. One worker was injured and was at an Edmonton hospital, in stable condition.

Syncrude is majority-owned by Suncor Energy, while Imperial Oil provides operational, technical and business management support.

Fire extinguished at Motiva Convent refinery; no injuries

A fire was extinguished on Saturday 18th March at Motiva Enterprises’ 235,000 barrel-per-day (bpd) Convent, Louisiana, refinery with no injuries, a company spokeswoman said in a statement.

Two sources familiar with plant operations said the fire broke out shortly before noon on the 45,000 bpd heavy oil hydrocracker, called the H-Oil Unit, which was being restarted to full production for the first time since a fire last August.

Motiva’s spokeswoman, Angela Goodwin, did not identify the unit involved in the fire.

A spokesperson for the Louisiana Department of Environmental Quality said the blaze was quickly extinguished.

The August fire heavily damaged the unit and forced it to remain shut down until late November when it returned to production at half capacity.

The unit was shut on the 3rd March to tie together the H-Oil Unit’s second repaired production train with the one repaired in 2016. Each production train accounts for half the unit’s capacity. Prior to Saturday’s fire the unit had been expected to reach full production sometime during the following week.

The H-Oil Unit is unique because it converts residual crude under high heat and pressure in the presence of hydrogen into motor fuel. Most refineries send residual crude like that which the H-Oil Unit processes to a coking unit to produce motor fuel feedstock and make petroleum coke, a coal substitute.

Insurance News

UK terrorism reinsurance fund hopes to include cyber

Britain’s £6 billion (US$7.3 billion) terrorism reinsurance fund hopes to extend its cover to include cyber-attacks on property, CEO Julian Enoizi has said.

Pool Reinsurance Company Ltd. (Pool Re), set up in 1993, acts as a backstop to insurers paying out claims on property damage and business interruption. It is financed by the insurance industry with government backing, and pay-outs depend on the British government deeming an attack to be terror-related.

In 2002, Pool Re extended its cover to include chemical and biological attacks after the 9/11 attacks in the United States.

There have been several cyber-attacks on property in recent years; in 2014, a German steel mill suffered damage to the plant’s network from a cyber-attack.

Mr Enoizi said that this and other incidents had been ruled out as terror attacks, but Pool Re needed to be prepared. “Insurance is there for the unimaginable – we’re here to insure the unforeseen,” he said.

The fund has held discussions with the government and industry, and it hopes to add cyber to its coverage in the next few months, he added.

Mr Enoizi said any increase in the premium costs to businesses for adding this cover would be accompanied by discounts for implementing government-approved cyber security policies.

Demand is expected to spike after EU legislation on data privacy is implemented by mid-2018. This will require companies to notify authorities of data breaches likely to harm individuals, similar to US arrangements.

But most cyber policies relate to data loss, rather than attacks on property. “We see this as a gap in the cover,” Mr Enoizi said.

Cyber-attacks on property worry businesses and insurers. These include an attack at some apartment buildings in Finland last year which knocked out the heating system when it was below freezing outside. This attack was not deemed an act of terror.

Insurers have said the source of a cyber-attack is hard to prove, and most policies pay out regardless of the cause.

Pool Re’s cover would be limited to terror-related cyber-attacks, once the British government assessed it to be an act of terrorism, Mr Enoizi said.

British insurers seek EU cross-border trade deal

Britain needs a new trade deal with the European Union which gives UK and EU insurers and reinsurers the right to operate across borders, an industry lobby group said on the 9th March.

Many businesses in Britain are already looking at setting up subsidiaries in the EU to prepare for a “hard Brexit”, in which they would lose the right to sell goods and services across the bloc.

AIG has said it planned an EU hub in Luxembourg following Britain’s decision to leave the bloc, the biggest financial services firm so far to detail such a move. Lloyd’s was due to decide by the end of the month where to locate its EU subsidiary in the event of a loss of so-called passporting rights which allows it to do business in the EU.

Nicolas Aubert, Chairman of the London Market Group (LMG), said an EU trade deal was “crucial”, with more than £8 billion (US$9.72 billion) in insurance premiums from the European Union written annually in London.

The LMG was working with the British government to look for “existing precedents in current international agreements which could be used for the Brexit negotiations to support our industry,” Mr. Aubert said in a statement accompanying the group’s Brexit recommendations.

Banks, insurers and asset managers have given up on demands for full EU passporting rights after Brexit and are instead asking for limited market access for some sectors.

Insurers will decide by June 2017 where to set up EU subsidiaries to enable them to keep selling insurance across the bloc, given the process takes 18-24 months, the LMG said.

The London insurance market was also seeking a guarantee of regulatory equivalence with EU capital rules, the LMG said.

“We expect that the EU will not permit UK undertakings to carry on business in the EU if there is a fundamental divergence in regulatory standards,” it said.

Some insurers have said existing EU rules make it too expensive to invest in illiquid assets such as infrastructure. But the Bank of England has said the rules need tweaks rather than an overhaul.

The LMG also said it was seeking a transition period to implement any new arrangements post-Brexit, during which time UK insurers would keep single market access.

AIG prepares for Brexit with new Luxembourg insurance company

American International Group (AIG) is planning to have two subsidiary insurance companies in Europe from 2019 – one in the UK to write UK business and one in Luxembourg to write European Economic Area (EEA) and Swiss business.

The latter will have branches across the EEA and Switzerland.

The insurer stated that the plans were designed to “ensure continued smooth operation of its business” across the EEA and Switzerland once the United Kingdom leaves the European Union.

AIG currently writes business in Europe from a single insurance company based in the UK, AIG Europe, which has branches across the EEA and Switzerland. The provider added that the UK is its largest single operation in Europe and that it will continue to support its European operations from the UK.

The proposed restructure is expected to complete in the first quarter of 2019, subject to regulatory approval.

Specialist Lloyd’s insurer Neon has launched a new marine and offshore construction consortium

Neon has launched a new marine and offshore construction consortium that offers $70 million capacity for shipyard construction and $55 million for rig construction.

The Neon-led consortium, with capacity from a range of Lloyd’s syndicates, seeks to address the increasingly bespoke insurance needs of shipyard clients, the insurer said. The consortium is underwritten by Mireille Dolonen, who joined the company in June 2016.

“Underwriters in London can no longer afford to sit back and expect business to come to them when macroeconomic conditions, product lines, strategic, financial and operational risks are all changing and shaping the insurance needs of shipyards,” said Angus Wilson, Head of Marine at Neon.

“With Neon at the forefront, this customer-centric initiative increases the London market’s relevance and proximity to clients and enhances client advocacy through improved communication. The launch of this consortium is also a clear example of Neon’s ambitions to become one of the leading providers of Marine insurance in the London market, capitalising on Mireille’s unrivalled expertise.”

Lloyd’s syndicates flock to India

The establishment of a Lloyd’s branch in India is being followed by intense activity among syndicates keen to increase their exposure to the country, according to law firm Clyde & Co.

“We are experiencing a flow of enquiries as syndicates wishing to participate in Indian reinsurance business move to set up service companies in India,” said Vineet Aneja, a partner at Clyde & Co’s Indian associated firm Clasis Law.

Lloyd’s has received final regulatory approval from the Indian insurance regulator and has confirmed that it will open a reinsurance branch in India in time for major renewals in April.

The Lloyd’s decision reflects the ongoing internationalisation of a market which has been working hard to broaden its appeal to foreign insurers, Mr Aneja observed.

A number of foreign reinsurers have recently received approval to open a branch in India. The list includes Swiss Re, Munich Re, Hannover Re and XL Catlin.

The move follows a change of reinsurance rules in India, placing branches of foreign reinsurers at the top of a preference order setting out how Indian insurers are to cede business.

“Over the past couple of years there has been a raft of changes to the legal framework. If 2015 was about the introduction of new rules, 2016 was about their implementation. Now that the new legislation is bedding in, international players are finally able to start building or strengthening their presence in one of the world’s most promising insurance markets.

“With a population of more than 1.25 billion, a rapidly emerging middle class and comparatively low insurance market penetration, India is undoubtedly an attractive market for insurers.

“Following the recent change in the law in India, we have seen a number of international insurers move quickly to increase their stakes in local joint ventures to the new permitted level of 49 percent, up from the previous limit of 26 percent via the automatic route i.e. without prior approval of the government,” Mr Aneja said.

Joint ventures remain a tried and trusted means to access local knowledge or technical expertise to build or strengthen a position in new markets, Mr Aneja noted.

“We believe that setting up a branch or subsidiary will also continue to be an attractive route to growth, especially where barriers to M&A exist. The new rules in India have seen the large global insurers move quickly to set up new offices and position themselves in a market which offers genuinely huge potential.”

London Market’s placing platform, PPL, expands offering with marine lines

PPL, the London market’s electronic placing platform, has announced that marine business is now available to be bound on the PPL platform.

The platform began trading stand-alone terrorism risks in July 2016, and now writes political violence, financial and professional lines, along with the latest addition of marine.

“The marine market represents the historic roots of the London market, and we are delighted that this significant class of business has joined the PPL community,” said David Ledger, Chairman of the PPL board, noting that 950 marine underwriters and brokers are ready to start using the platform.

“Market adoption across the existing lines of business is growing and, as the platform gains more users and improvements come on line, so we are seeing market confidence increase,” he said.

“Since the beginning of 2017, we have added stand-alone political violence risks as an extension to the terrorism class of business, and we are making a number of upgrades to the platform as well as enhancements to functionality and usability,” he added.

The PPL platform is an initiative of the London Market’s Target Operating Model, a programme which aims to modernise the market and make it easier to do business in and with the London market.

Between July 2016 and the end of January 2017 more than 1,600 risks were bound and 2,762 endorsements made, said a PPL spokesperson.

Hefty fine for oil pipeline spill in Montana

The Montana Department of Environmental Quality (DEQ) has announced a civil penalty of US$1 million against Bridger Pipeline LLC for a pipeline spill which resulted in the release of 31,000 gallons of oil into the environment. The oil made its way into the Yellowstone River and contaminated City of Glendive’s water supply.

The penalty will be paid as US$200,000 to the State of Montana’s general fund and at least US$800,000 will be earmarked for approved “supplemental environmental projects” aimed at reducing pollution, benefiting public health and restoring the environment, according to the DEQ.

The accident occurred in January 2015 when the oil pipeline, owed by Bridger Pipeline LLC, split at a weld and oil began spilling into the Yellowstone River, just upstream from Glendive, a city with a population of approximately 2,000. Around the same time, residents of the city began reporting a bad taste and smell from drinking water. The community switched to bottled sources.

Analysis of the drinking water found benzene at a level three times the limit for long-term exposure risk, according to the US Environmental Protection Agency. Oil was detected in fish captured near the leak site.

Recovery and containment of the spill in the Yellowstone River was made difficult due to ice cover. At times, clean-up efforts were halted due to ice on the river. Much of the oil travelled downstream under the ice, according to the Montana DEQ. Oil sheens were reported as far away as Williston, North Dakota, almost 100 miles downstream. It was estimated that less than ten percent of the oil was recovered as part of the clean-up efforts.

The busted oil pipeline was the responsibility of Bridger Pipeline LLC, which is one of many companies operated by True Oil out of Casper, Wyoming. The business had a history of 30 spills and a number of fines prior to the January 2015 incident.

Prior to the announcement of the penalty by the Montana DEQ, Bridger Pipeline paid for spill response, clean-up and site management work by the Montana DEQ, according to department spokeswoman Jeni Flatow. To date, the company has paid US$80,000 towards those costs, she said.

The company also paid as much as US$100,000 for monitoring equipment at Glendive’s water treatment plant, according to Mayor Jerry Jimison. “As far as the city of Glendive is concerned, our water plant is back up and functioning flawlessly,” he said. “We are happy with the final result here in Glendive.”

A separate environmental assessment will continue, which could lead to more fines for Bridger Pipeline. In October, the Montana Department of Justice announced it would seek compensation for damages caused in the spill.

Insurance method designed to safeguard decommissioning

Quatre has devised what it claims is a new method for funding decommissioning of oil and gas fields.

Various estimates suggest that between now and the mid-2050s, around 470 platforms, 5,000 wells, 10,000 kilometres (6,214 miles) of pipelines and 40,000 concrete blocks will have to be removed from the North Sea.

Oil & Gas UK has estimated that it could cost nearly £17 billion (US$21.1 billion) over the next decade to decommission just 80 platforms, plus associated support infrastructure, while the figure to complete the entire programme could approach £60 billion (US$74.6 billion).

Quatre’s solution involves setting up of a Special Purpose Trust, designed to protect the public purse from decommissioning liabilities and ensure that economic recovery is maximised. It involves providing post-decommissioning liability insurance to address the risk of failure of any decommissioning work.

The company is an Appointed Representative of Property Insurance Initiatives, authorised and regulated by the UK Financial Conduct Authority in respect of the negotiation and placement of post-decommissioning liability insurance policies.

Ryan Specialty Group acquires marine MGA Trident

Ryan Specialty Group Underwriting Managers has signed an agreement to acquire specialty marine managing general agency Trident Marine Managers.

The Houston-based MGA offers nationwide coverages focusing on marine and energy operations within the Gulf of Mexico.

Following the transaction, Trident’s joint Managing Directors Martin Hayes and Michael Johnson will continue to lead the practice.

Brexit prompts marine mutuals to look elsewhere

UK-regulated marine liability insurers are preparing plans to open new outposts in European Union jurisdictions such as Luxembourg and Cyprus, fearing that Brexit will hinder access to the EU’s financial market, industry sources involved say.

Britain dominates the global marine insurance market, and losing access to specialist protection and indemnity clubs could further weaken other parts of its multibillion-dollar shipping services sector.

Several Greek ship-owners have already moved operations out of Britain anticipating changes that could remove their favourable “non-domicile” tax status.

Of the 13 major global P&I clubs, six are regulated in the United Kingdom and are estimated to account for over half the total market share of an industry that insures about 90 percent of the world’s ocean-going tonnage. Many of the clubs have been an integral part of the City of London for nearly two centuries.

Many sections of the financial industry have said they may need to relocate certain businesses after Brexit, but for P&I clubs the issue is particularly acute because a greater share of their earnings comes from elsewhere in Europe.

While negotiations between Britain and the EU have yet to start, the central concern is the loss of “passporting” rights which enable financial firms to operate across the bloc under the supervision of one member state’s regulator.

Anthony Jones, Director with London Club, one of the six, said it was “actively exploring our options for a post-hard Brexit operating scenario,” referring to Britain making a clean break with the European Union.

“We have prepared a shortlist of potential jurisdictions from which we could write EEA (European Economic Area) business, and our investigations are continuing as we attempt to identify which of these might best suit our requirements,” Mr Jones said.

Insurance and shipping sources say landlocked Luxembourg is among the top contenders. Two P&I clubs are already regulated there, it has a cluster of other maritime companies and businesses like its regulatory and tax regimes.

A spokesperson for Luxembourg for Finance – the national financial development agency – said numerous UK companies including insurers were currently considering Luxembourg for their post-Brexit set-up.

Claude Wirion, Director of Luxembourg’s insurance regulator CAA, said it had a long track record of supervising internationally active insurers including P&I clubs.

Shipping sources said Cyprus was another possible destination, keen to boost its maritime industry and recently attracting more shipping companies, including Greek ship-owners previously based in London.

A Cypriot official said there had been early communication over potential interest by clubs to establish a base there, declining further comment.

Andrew Bardot, Executive Officer of the International Group of P&I Clubs – the umbrella association for the 13 insurers – said other possible jurisdictions included Ireland, Germany and Greece.

“‘Wait and see’ is not an option given the time that it will take to set up a regulated subsidiary within an EU member state,” he said.

British economy

Europe represents 30 to 50 percent of the clubs’ global business, partly due to the dominance of Greek shipping companies in the industry. In contrast Lloyd’s, the world’s leading specialty insurance market, gets around 11 percent of its business from countries outside Britain in the EU’s shared market.

A study conducted by the City of London Corporation last year showed P&I clubs with a presence in the UK accounted for over £1 billion (US$1.24 billion) of UK gross earned premiums, out of a total of £7.5 billion (US$9.31 billion) for the marine insurance sector in 2014.

North Club, another British-regulated P&I insurer, said it was “working on a range of contingency plan”, which included a new EU outpost.

Britannia Club said it was “considering its options”, while Standard Club and UK Club declined to comment on their plans. Steamship Mutual Club did not have immediate comment.

Of the two regulated in Luxembourg, Ship-owners Club declined to comment.

The other, West of England Club, said UK-regulated clubs were likely to be getting on with “some form of dialog with regulators like Luxembourg.”

“If you had to do it, you would want to be talking to at least a handful of regulators to get a dialogue going with each to ensure not being at the back of the queue,” said West of England CEO Peter Spendlove.

Shell/ExxonMobil firm held liable by Dutch court for ‘psychological suffering’

A Dutch court has ruled that an energy company jointly owned by Shell and ExxonMobil is liable for the psychological suffering of residents in the north of the country whose homes have been damaged by small earthquakes caused by gas drilling.

In a ruling on the 1st March, a court in the northern city of Assen held the Netherlands Petroleum Company (Nederlandse Aardolie Maatschappij), known by its Dutch acronym NAM, liable for so-called “immaterial damages” suffered by residents and ordered the company to pay them compensation.

NAM said in a statement that it is studying the ruling.

NAM official Thijs Jurgens said the company has “always stated that we are responsible for earthquake-related damage” including immaterial damages.

The court case was launched by 127 residents who claimed they suffered emotionally because of the earthquakes.

Ireland to introduce insurance to cover oil spill clean-up costs

Companies hunting for oil off Ireland’s coast will soon have to make sure they can cover the huge clean-up cost which would mount up if a catastrophe such as the Deepwater Horizon disaster was to unfold.

The Government is fleshing out how much insurance cover explorers will need to meet the likely costs of such a potential disaster. It also wants procedures put in place to make sure that compensation would be paid promptly.

The Department of Communications, Climate Action and the Environment is introducing the new measures on foot of an EU directive introduced following the 2010 Deepwater Horizon disaster in the US.

The Deepwater Horizon rig was owned by BP. A blowout there caused 11 deaths and saw three million barrels of crude oil pour into the Gulf of Mexico. The disaster cost BP about US$62 billion (€59 billion) in clean-up costs, compensation and fines.

Following the disaster, the European Union found that the regulatory framework applying to the safety of offshore oil and gas operations in Europe did not provide adequate assurance that risks from offshore accidents in the EU were minimised.

A new directive included financial liability indemnity and insurance requirements which must now be adhered to by petroleum undertakings, operators and owners.

“The Deepwater Horizon incident demonstrated that the costs of responding to, and economic recovery from, extreme-scale offshore accidents have the potential to overwhelm the resources of the liable party,” the Department noted in a document it had prepared as it seeks a consultant to determine how much insurance cover operators around Ireland will require.

Nigeria loses more than US$100 billion at oil fields

The Federal Government of Nigeria said it lost out on more than one hundred billion dollars in revenue last year as attacks by militants in the oil rich Niger Delta cut crude oil output to a record low.

Minister of State for Petroleum Ibe Kachikwu explained that production fell by one million barrels a day to 1.2 million a day at the peak of the attacks.

He added that in 2016, the country suffered its first full recession since 1991 as a resurgence of armed conflict in the Niger Delta, combined with lower oil prices, blighted the economy.

While peace efforts have since curbed the frequent attacks on oil infrastructure, the West African nation has struggled to boost output as one of the largest terminals remains closed.

Iran: oil and energy sector premiums more than double

The Iranian insurance industry’s total premium income during the nine months to the 20th December amounted to 200 trillion rials (US$5.24 billion), registering a 21.33 percent growth compared with the same period of last year.

Insurers sold 38.6 million insurance policies during the period.

Among these, oil and energy sector’s generated premiums registered the highest growth in the period – at 114.3 percent. However, with a premium income of 2.48 trillion rials (US$65 million), the category accounted for 1.24 percent of insurers’ portfolio.

The surge in insurers’ income from the “oil and energy” category could be the result of a number of accidents involving refineries and petrochemical complexes across the country.

A syndicate of 11 insurance companies, led by Iran Insurance Company, was to pay an estimated €60 million in damages to Bou Ali Petrochemical Complex over a devastating blaze in July.

The total paid claims in the category reached 565 billion rials (US$14.8 million), marking a record growth of 1112.8 percent compared with the same period of last year.

Insurers paid 13.4 billion rials (US$583,000) to claims in this category during the nine months to the 21st December 2015, according to the Central Insurance of Iran’s database.

Marine insurance premiums experienced a 27.5 percent drop, probably due to the availability of foreign insurance coverage as a result of the lifting of sanctions.

Iranian insurance firms paid 116.5 trillion rials (US$3.05 billion) in claims during the nine months to the 20th December, registering a 24.8 percent growth year on year. The loss ratio of the industry was 58.11 percent in this period.

Ironshore forms oil & gas facility for middle market energy sector

Ironshore Specialty Casualty has formed Ironshore Energy Solutions, a dedicated oil & gas facility offering liability coverages for onshore middle market energy classes in the United States. Ironshore Insurance Services LLC, its specialty managing general agency, will deliver capacity to underwrite middle market sector risk on behalf of six consortium insurance companies.

Ironshore Energy Solutions will provide up to US$11 million in insurance capacity for general liability and umbrella coverages for complex sector risks.

According to Ron Gleason, Leader, Global Energy Industry Practice, said the new facility will use an “innovative” approach to bring alternative capital to the US middle market.

Ironshore Energy Solutions will underwrite liability risk for US middle market energy entities with annual revenues ranging from US$5 million to US$200 million. Target energy classes are onshore oil and gas operators, contractors and small midstream companies.

Comprehensive terms and conditions of coverage will be structured to the specific coverage demands of the risk.

Ironshore’s Global Energy Industry Practice underwrites insurance programmes for commercial entities across all classes within the specialty market, including casualty, property, environmental, marine, professional lines and political risk.

Ironshore provides broker-sourced specialty property and casualty insurance coverages for varying risks located throughout the world. Select specialty coverages are underwritten at Lloyd’s through Ironshore’s Pembroke Syndicate 4000.

People on the Move

Bruce Carnegie-Brown confirmed as next chairman of Lloyd’s

Bruce Carnegie-Brown is to become the chairman of Lloyd’s following a meeting of the Council of Lloyd’s where his appointment as successor to John Nelson was approved unanimously.

The council confirmed on the 20th February that Mr Carnegie-Brown, Chairman of Group and Vice Chairman of Banco Santander, will take up the position in June of this year. This appointment is subject to formal approval and consent from the Prudential Regulation Authority and the Financial Conduct Authority.

Mr Carnegie-Brown has over 35 years of experience across the financial services. He was the CEO for Marsh Europe between 2003 and 2006, non-executive chairman of Aon UK from 2012 to 2015 and was also a senior independent non-executive director at the Catlin Group between 2010 and 2014. He will be stepping down from his current role as a non-executive director of JLT Group.

Currently, he is Chairman of Group since his appointment in April 2014 and a vice chairman of Banco Santander since February 2015. He previously worked at JP Morgan for 18 years across a number of senior roles, ran 3i Group’s quoted private equity division from 2007 and was a senior independent director at Close Brothers Group.

Chaucer scales back London energy team

Chaucer has cut two class underwriters from its energy team in London as it looks to control expenses amid a tough operating environment, according to the Insurance Insider.

Sources said Julia Aasberg, class underwriter for exploration and production, and Vera Schneider, class underwriter for renewable energy and energy liability, have both left the firm.

Chaucer’s energy team, which is led by Kelan Hunt, now counts three class underwriters in London.

Chaucer has scaled back its book dramatically as volumes and rates collapsed over the last two or three years.

In 2016, energy gross written premium at Chaucer totalled $158,7mn, a decrease of 20 percent on the previous year and down 36 percent on its 2014 writings.

Marine and energy head Williams leaves Hiscox

Simon Williams, Hiscox’s longstanding Head of Marine and Energy, has left the company.

He was Chairman of the Lloyd’s Market Association’s Joint Rig Committee until 2011 and held the position when Deepwater Horizon oil platform exploded in April 2016.

Talbot appoints new active underwriter to take CUO’s additional role

Talbot Underwriting, a subsidiary of Bermuda-based Validus Holdings, has promoted David Morris to the position of active underwriter.

Mr Morris will report to Chief Underwriting Officer James Skinner, who previously held the additional role of active underwriter.

Mr Morris most recently served as head of overseas offices and head of international property at Talbot London.

New head for Skuld Copenhagen

Skuld has appointed Krester Krøger Kjær as Head of Skuld Copenhagen.

He succeeds Helle Lehmann who is stepping down after eight years in the role. Lehmann will remain at Skuld in an advisory role until September.

Mr Krøger Kjær was previously head of claims and deputy head of the Copenhagen office.

Hanover names CEO of Lloyd’s unit

Hanover Insurance Group, Inc. said on the 20th February that John Fowle has been named CEO of Chaucer Syndicates Ltd., a Lloyd’s of London unit of Hanover.

Mr Fowle succeeds Johan Slabbert who is leaving the company to pursue other opportunities, according to a statement from Worcester, Massachusetts-based Hanover.

Previously, Mr Fowle was chief underwriting officer, according to the statement. His appointment is subject to Lloyd’s and regulatory approval.

Hanover bought Chaucer in 2011 for about US$500 million.

Arcus hires ex-Munich Re and Lloyd’s exec as syndicate manager

Arcus Syndicate 1856, part of Barbican Insurance Group, has appointed Gary Delaney as syndicate manager.

Most recently Mr Delaney was a class of business deputy executive at Lloyd’s, where he worked with the underwriting performance department and performance management directorate (PMD).

In his new role, Mr Delaney will support active underwriter Nicky Payne in running all aspects of the syndicate’s underwriting operations. He will report to head of Arcus Syndicate Rajiv Punja.

Swiss Re corporate solutions names global claims head

Swiss Re corporate solutions has appointed Jim George to the role of global head of claims.

He succeeds Nicola Parton, who is now the head primary lead strategy and client engagement.

In his new role, Mr George will lead the global claims organisation and serve as a member of corporate solutions’ management and business management committees.

Mr George most recently served as the head of North America claims.

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