Energy Review 04-2017
27 April 2017
Towards the end of last month the UK triggered Article 50 to commence the two-year negotiation period leading up to exiting the European Union (Brexit). For many, the phoney war has ended: posturing and creating rumours will now be replaced by teams representing both sides negotiating a deal acceptable to all. In a way, all of the conjecturing is becoming reality and, of all of the four regions of the United Kingdom (England, Wales, Scotland and Northern Ireland), the Scots look like losing the most. Taking the country by surprise the Prime Minister has also called a snap general election for the 8th June in the hope of strengthening her leadership.
An analysis from the Robert Gordon University Oil and Gas Institute revealed the potential impact of exiting the European Union (EU). The assessment warned that Brexit could cost the oil and gas supply chain US$247 million (£200 million) extra per year in tariffs and export taxes. Whilst that amount of money is not to be sneezed at, the mere fact that a figure of this size is important to Scotland does put this fragile economy into perspective when we read that Iraq’s oil revenue in February alone was US$4.5 billion. Whereas employment in the global oil industry is on the increase, in Scotland this is not the case. Since 2014, more than 120,000 people across the UK have lost their jobs in the sector as a result of the downturn – most of them in Scotland.
Amongst Scotland’s key industries one will find: financial services, renewable energy, oil and gas, ICT and electronic technologies. These are already floundering as a result of the drop in the price of oil and are likely to suffer even more from the denial of access to the single European market. Similarly, three of Scotland’s top four export markets (USA, Netherlands, France and Germany) are EU member states where barriers and tariffs are expected to become a hindrance to Scotland’s economic performance.
The future for Scotland does not look too good at the moment and the question must be asked: how could the country ever manage if it split off from the UK? For many people this is a more important issue than the increasingly frosty relations between the West and Russia. There is no time limit on how the West confronts dictators, but an unfavourable solution to the Brexit question for Scotland must be avoided within just two years. Even as the cost of a barrel of oil edges up slowly, Scotland’s reliance on its UK partners looks to be the best bet for the future.
Much of the news people look at relates to oil exploration and production as well as how it is transported. The vast tankers now in use have necessitated the expansion of the Panama Canal. Especially in North America, the rail network struggles to cope with the huge quantities of oil on the move. Pipelines are regarded as a safer medium of transportation and so we have gathered some headline news: Italian court halts Trans Adriatic Pipeline (TAP) pipeline work in Italy; beset by delays, Myanmar-China oil pipeline nears start-up; the US has one inspector for every 5,000 miles of oil pipeline; Allseas seals the deal for Baltic Sea pipeline work; Jordan-Iraq oil pipeline to cost US$5-7 billion; talks underway to ship east Mediterranean gas to EU via pipeline; operators plan to complete installation of 7,750 miles in 2017 alone, with natural gas plans (6,061 miles) making up more than 78% of the total.
In our Energy Casualty section we have interesting news on piracy, hijacking and kidnappings. There is also news of some large oil spills and hefty fines. News of market moves always shows one or two unexpected departures and relocations and, as UK-based firms open offices in the EU, we should see more of these.
Worldwide insurance markets have fared pretty well as we move well past the first quarter, but closer study reveals that energy re/insurance market pricing is facing difficulties. According to one report, price declines have persisted throughout the market and many underwriters are continuing to operate with combined ratios over 100%. Both onshore and offshore premiums have fallen from approximately US$6.5 billion to US$3 billion over the past two years.
But all is not gloom and doom. Fortunately we can rely on Lloyd’s, for many still the market of mystery and miracles. How an underwriter can make a profit from insuring a wine connoisseur’s nose is what gets a lot of attention but it is the stability and decisive approach to challenges which is reassuring. Lloyd’s has chosen Brussels as the site for its European Union subsidiary because of its strong regulatory framework. Other carriers are looking at Dublin, Luxembourg and Malta but if Lloyd’s chooses Brussels, quite a few others will do so, too – grateful that someone has taken the lead. It is in another leading developing market where Lloyd’s is now making its mark: Lloyd’s has started operating in India with MS Amlin as its first underwriter.
We hope our articles are of interest to our readers and look forward to working with you as we (already!) approach the first half of the year.
PSA probes gas leak from Åsgard manifold
Petroleum Safety Authority Norway (PSA) has opened an investigation into a gas leak on the Åsgard field in the Norwegian Sea.
The incident occurred on Friday 10th March during preparations for a well operation from the Deepsea Bergen semi-submersible.
Gas reportedly escaped from the seabed manifold to the sea and, according to operator Statoil, the leak continued for 20 minutes.
While gas was observed on the sea surface, it was not detected on the Deepsea Bergen.
PSA intends to clarify the course of events and identify the direct and underlying causes in order to contribute to lessons learned and experience transfer.
One of its main areas of scrutiny will be the planning for and risk assessment of the operation.
Piracy and militancy cost Nigerian oil and gas industry more than US$7 billion
The Gulf of Guinea continues to be one of the most dangerous bodies of water in the world for merchant shipping. Armed and dangerous pirate gangs from the Niger Delta have been responsible for attacking commercial vessels throughout the wider region, conducting armed robberies, stealing oil and abducting crew for ransom. This article presents the EOS Risk Group intelligence department’s infographic for Nigerian piracy.
Q. What were the key developments for maritime piracy in the Gulf of Guinea in 2016?
In January 2016, a fresh wave of militancy and insecurity struck the Niger Delta region.
Militant groups, both old and new, embarked on a concerted campaign to cripple Nigeria’s oil and gas industry, costing Africa’s largest crude oil producer over US$7 billion in lost revenue by the end of the year.
Militant groups, such as the infamous Niger Delta Avengers, the Niger Delta Greenland Justice Mandate and the Bakassi Strike Force, accuse international oil companies and the Nigerian Federal Government of the unfair distribution of the Delta’s resource wealth.
Increased insecurity in the Niger Delta has coincided with an uptick in pirate attacks off Nigeria in 2016.
Throughout the year, Nigerian pirate groups cemented their shift away from the hijacking of tankers for product theft – with only one attempt recorded in 2016 – and have instead turned their focus almost exclusively to the kidnap of crew for ransom.
This change in modus operandi has largely been driven by a decline in global oil prices, improved regional maritime surveillance and the purging of corrupt institutions in the Niger Delta.
Marine kidnap for ransom also provides a more favourable risk-reward ratio for pirates than tanker hijackings, which require far more technical expertise, investment and support structures.
Whilst the threat of product theft has not disappeared, demonstrated by the hijacking of the MT Maximus off Abidjan in February 2016, kidnap for ransom is now the overriding security concern for vessels operating on the high seas.
Q. How many pirate attacks were reported?
At least 52 Nigerian pirate attacks were launched throughout the year.
However, this number should be considered a baseline figure only. EOS removed all unconfirmed incidents and suspicious sightings from its statistics.
The International Maritime Bureau (IMB) has stated that the under-reporting of attacks off Nigeria is a cause for concern.
Q. Where did attacks occur?
Unlike tanker hijackings, which have occurred as far south as Angola and as far west as Cote D’Ivoire, marine kidnap for ransom is typically conducted in much closer proximity to the Niger Delta.
During 2016, the clear majority of attacks were conducted within a lane running 130 nautical miles offshore of the Niger Delta and within 40 nautical miles of the coasts of east Rivers, Akwa Ibom and Cross River States, Nigeria.
Outliers were present, but rare.
Q. Which vessels are most at risk?
Certain vessel characteristics, such as low freeboard and speed, can make a vessel a more attractive target to pirate gangs, but all commercial vessels which can be boarded from the water are at risk of being attacked when they are navigating in piracy risk waters.
This is because the commodity the pirates currently value most is the vessel’s crew and not its cargo.
EOS has witnessed Nigerian pirates developing their boarding capabilities.
A pirate group attacked two vessels off Bayelsa State in 2015, securing hostages from one vessel but failing to board another due to its higher freeboard.
Once EOS had facilitated the release of the seafarers, they informed the crisis management team that the pirates had added four metres to their existing aluminium boarding ladder while they were in captivity.
The clear majority of attacks off Nigeria in 2016 involved oil/chemical tankers, followed by offshore support vessels.
This is unsurprising, as both vessel types are the most frequent visitors to Nigeria’s offshore oil terminals.
Bulk carriers, container ships, general cargo vessels, LNG tankers, fishing vessels, a refrigerated cargo vessel, a dredger and a vehicle carrier were also subjected to attacks during the year.
Q. How do most attacks play out?
Typically between 3-15 heavily armed pirates will approach a victim vessel using one or two speedboats.
In 2016, pirates fired upon the vessel with automatic weapons as they were approaching in at least 38% of reported attacks. EOS is also aware of a few cases where pirates have been in possession of makeshift explosives during attacks.
During one case in 2016, pirates threw tin cans with explosives and a lit fuse onto the deck of a tanker prior to boarding the vessel, although fortunately the devices failed to detonate.
This was possibly an attempt to further intimidate the crew into stopping the vessel or to try and dislodge razor wire protecting the tanker’s guard rail.
If able to get alongside, pirates will use a ladder and occasionally grappling hooks to scale the ship’s freeboard and gain access to the deck.
Once onboard they will head directly to the bridge to attempt to access the crew.
This period poses the greatest risk to those onboard, as pirates are often intoxicated with drugs and alcohol and may fire indiscriminately and are anxious to depart before a possible naval intervention.
Whilst the crew are the primary target, the pirates will often steal valuables onboard and damage communications equipment to reduce the likelihood of a response.
If the crew are accessible, the pirates will select their victims, blindfold them and depart for their camp in the Niger Delta.
Q. How many seafarers were kidnapped in the Gulf of Guinea 2016?
At least 52 seafarers were kidnapped from commercial vessels in the Gulf of Guinea in 2016, a 41% increase from 2015.
The Master of the vessel is almost always included within the kidnap victims, along with other high ranking officers who are a) more likely to be on the bridge at the time of the attack and b) more valued by pirate gangs.
Pirates kidnapped between one and six seafarers during each successful attack.
Q. What measures do shipping companies take to protect their crews from pirate attacks?
Razor wire, safe rooms (citadels), pressurised water hoses and other physical measures can be taken by Masters to help prevent pirates from boarding their vessel and gaining access to the crew.
Many lessons learnt from Somali piracy in the Indian Ocean have been transferred to the Gulf of Guinea.
Without more comprehensive reporting it is difficult to know which measures have been most effective in deterring pirate attacks, although data compiled by EOS suggests that crews successfully used citadels to protect themselves in 37% of cases where pirates boarded their vessel.
Whilst sensible, re-routing a vessel away from high risk waters isn’t always possible off Nigeria, as some terminals and ports cannot be reached without running the pirate gauntlet.
Armed security services are available for vessels navigating the Gulf of Guinea risk areas, which typically involves the sub-contracting of staff from local state navies.
In 2016, 21% of vessels attacked were carrying embarked Nigerian Naval guards.
Q. What happens to the crew once they have been kidnapped?
The crew will often be taken to the pirate group’s hideout in the Niger Delta, from where negotiations will be staged.
Kidnapped crew were held, on average, for 28 days in 2016.
Treatment in captivity varies depending on the pirate gang, but in EOS Risk’s experience as a Lloyd’s approved K&R response company, pirates rarely physically harm hostages if sensible negotiation strategies are used.
Once negotiations have concluded, a collection team must be sent to secure the hostages from a pre-arranged location, which is typically in an isolated and inhospitable area of the Niger Delta.
During their time in captivity, the crew will be exposed to tropical diseases, psychological distress or trauma and potentially, physical abuse, so hostages are driven directly to hospital for a check-up and treatment post-release.
Husky reports two incidents offshore eastern Canada
Husky Energy recently reported an unauthorised discharge of BOP control fluid from the Henry Goodrich mobile offshore drilling unit offshore Newfoundland.
The Canada-Newfoundland & Labrador Offshore Petroleum Board (C-NLOPB) said the incident occurred on the 26th March. The drilling rig was disconnected from the BOP at the time of the release and had moved off the well due to impending weather.
An estimated 6,397 litres of BOP control fluid (68% water, 28% Glycol and 4% Stack Magic) was released into the environment, according to Husky Energy.
The C-NLOPB is monitoring Husky Energy’s continued investigation of the incident.
The CBC reported that operations on the rig had halted last July following an unauthorised discharge of hydraulic fluid while working on White Rose under a two-year contract.
In a separate incident, Husky Energy called in a “near miss” to the C-NLOPB: A medium-sized iceberg came within 180 metres (590 feet) of the SeaRose FPSO at about 5:30 a.m. a few days after the control fluid incident. According to the board, the iceberg was about 40 metres wide x 60 metres long x 8 metres high (131 feet x 197 feet x 26 feet) above water.
The iceberg, while being monitored by Husky Energy, changed course and headed toward the SeaRose. SeaRose operates in the White Rose oil and gas field.
Husky mobilised its Regional Response Management Team and the C-NLOPB was notified of the situation. Production wells were de-pressurised and the flow-lines flushed with treated seawater. The crew mustered in preparation for a potential disconnect.
The iceberg passed the vessel and was outside of the 500 metres (1,640 feet) zone within about a half-hour.
Pipeline owner: North Dakota crude spill larger than first estimated
A crude oil spill in western North Dakota in December is now believed to be about three times bigger than originally estimated, pipeline owner True Companies said, making it the largest crude leak to affect water in the state in over a decade.
The Belle Fourche crude oil pipeline spilled an estimated 12,615 barrels of oil, more than the December estimate of 4,200 barrels, spokeswoman Wendy Owen said.
The spill is the second-largest crude spill in the state in more than 15 years, behind a 20,600-barrel leak by a Tesoro Logistics LP pipeline in 2013, according to data from the Pipeline and Hazardous Materials Safety Administration.
Around 80% of the clean-up is complete, Ms Owen said, noting the incident occurred following ground movement. Oil from the pipeline leaked into the Ash Coulee Creek and on a hillside.
The pipeline operator has collected around 3,900 barrels of oil from the creek by skimming and vacuuming, Ms Owen said. No oil moved further down the creek, which feeds into the Little Missouri River and eventually flows into the Missouri River, a major source of drinking water, she said.
The North Dakota Department of Health has not yet completed a subsurface investigation on the hillside affected by the leak to confirm how much oil remains, Agency Programme Manager Bill Seuss said.
The spill was not originally detected by monitoring equipment, which True Companies has said was likely due to its intermittent flow.
The spill occurred about 150 miles from where the Standing Rock Sioux tribe and environmentalists were protesting Energy Transfer Partners’ controversial Dakota Access Pipeline. Those groups said a spill could contaminate drinking water.
President Donald Trump signed executive orders paving the way for the Dakota Access Pipeline and TransCanada Corporation’s Keystone XL shortly after taking office. On the 24th March, he issued a presidential permit for the Keystone XL.
The six-inch North Dakota pipeline has capacity to move 24,000 barrels per day, at a maximum rate of 1,000 barrels per hour.
While Belle Fourche’s impacted line remains shut for clean-up operations, another line is moving crude oil from its origin and receipt points.
The incident led to US pipeline regulators ordering the company to improve leak detections, along with other actions.
Alaska oil well leaking gas in northern part of state
A federal official says crews in Alaska are ready to shut down an oil well that is misting natural gas on the frozen North Slope, but officials say it’s too unstable for responders to get close.
The Environmental Protection Agency says a crack in a BP wellhead near Deadhorse sent up mist of crude oil on Friday 14th April before it froze over and an initial leak stopped.
“Based on an overflight with infrared cameras, the release appears to be contained to the gravel pad surrounding the wellhead and has not reached the tundra,” BP spokesman Brett Clanton said.
A response team made up of state and federal energy officials and BP personnel was not able to secure the well Friday night or Saturday due to safety concerns.
Two leaks have been identified on the well, one near the top and one further down the well assembly, BP said. The upper leak was misting oil in conjunction with leaking natural gas, but activation of a surface safety valve stopped the release.
The bottom leak was releasing gas and a small amount of crude oil, the energy giant said.
It’s unclear how much has vented, but nearby workers have been evacuated and native Alaskan villages dozens of miles away have been notified.
No injuries have been reported.
The agency says the initial oil release may have affected an area of about 1 ½ acres. There were no reports of damage to wildlife.
Fire near sabotaged Yemen oil pipeline kills 13
At least 13 people were killed in a fire that broke out near an oil pipeline damaged by sabotage in the west of war-torn Yemen, a government official said on Saturday 8th April.
“Dozens of people had gathered at the site of the pipeline with bowls and other containers to fill with petrol spilling from the pipeline” in Hodeidah on the Red Sea, the official in Yemen’s recognised government said.
He said the fire broke out because of the use of an electricity generator, leaving 13 dead and 26 others with burns, while eight people remain missing.
Yemeni government forces are preparing for an assault on the nearby port of Hodeidah held by Houthi rebels.
Fighters aligned to President Abd-Rabbu Mansour Hadi and the government’s Arab allies are building up around Hodeidah, despite UN calls for a de-escalation in tensions around the town.
Global maritime kidnappings rise nearly 45%
Maritime kidnaps across the globe surged by 44% in 2016, in part driven by an uptick of activity in the Gulf of Guinea and in the Sulu and Celebes Seas, according to Control Risks’ global maritime analysis.
Additionally, maritime hijacks were down by 83% globally in 2016, driven by a decline in hijacks-for-cargo and hijacks-for-bunker theft in South-East Asia and the Gulf of Guinea following improvements in regional law enforcement.
“The downward trend in the Gulf of Guinea and South-east Asia will continue in 2017, as Nigerian and Indonesian naval forces respectively continue their targeting of organised criminal syndicates,” Control Risks informed.
Another evolving trend in 2016 was the significant increase in cases where militants or terrorists targeted port infrastructure, naval and commercial vessels or offshore platforms. Libya and Yemen accounted for most of these, with several high-profile attacks recorded.
“The trends seen globally in 2016 highlight the dynamic nature of groups engaged in offshore crime. The interplay between socio-political developments onshore and the frequency of offshore crime was particularly visible in the Gulf of Guinea, and it was also telling how assailants in different regions are responding to security measures, or lack thereof, for instance in South-east Asia,” Sebastian Villyn, Maritime Risk Analyst at Control Risks, said.
Mr Villyn added that, despite an overall global decrease in maritime security incidents, high-severity cases of maritime terrorism and kidnaps increased.
“These trends are likely to continue and pose a significant threat to maritime operators in 2017. Operators should therefore ensure that they have access to reliable and up-to-date information on the current threat landscape,” he said.
UAE ship ‘hijacked’ off Somalia
The reported capture of a bunkering tanker off Puntland would be first hijacking in many years.
Somali pirates are reported to have hijacked a ship off the country’s northern coast in what would be the first capture of a commercial vessel since 2012.
The United Arab Emirates-owned bunkering tanker Aris 13 is said to have been taken on the 13th March off northern Puntland.
The Sri Lanka-flagged vessel is said to have sounded the alarm that it was being pursued by two skiffs before switching off its tracking system and heading towards the port of Alula.
The development, if confirmed, will raise concern among offshore vessel, seismic vessel or rig players, who routinely have assets passing through the Gulf of Aden or working in the wider East African region.
Somali pirates regularly hijacked large commercial vessels in the latter part of the last decade and early in this decade, but this was eventually brought to a halt through a combination of naval patrols, on-board security and the implementation of best practice on vessels.
Although all of these practices remain in place, the onset of drought and famine in parts of the war-torn Horn of Africa nation could spur a resurgence in pirate activity.
Two more piracy attacks in Gulf of Guinea
On the 13th March, two reports of piracy were published.
Bulk carrier Sofia was attacked by pirates in the Gulf of Guinea 120 nautical miles south-west of Brass, Nigeria, while en route from Lagos to Libreville, Gabon.
Sofia was approached by a motor skiff containing seven heavily armed men who fired upon the ship and tried to board. The Master and duty officer raised the piracy attack alarm, increased Sofia’s speed and manoeuvred to avoid boarding. All non-essential crew retreated to the citadel. After about 40 minutes of pursuit the pirates gave up and changed course to the shore. Sofia proceeded to Owendo Anchorage, Gabon. The vessel suffered some peripheral damage from the gunfire, but no leaks resulted.
Sofia is 56,899dwt and 32,983grt. According to databases, Sofia is covered by London P&I through Trieste Enterprise, Inc.
LNG tanker La Mancha Knutsen was also attacked by pirates in the Gulf of Guinea, 90 nautical miles south of Port Harcourt, Nigeria. Once again the tanker was approached by a suspicious motor skiff with at least seven heavily armed men on board, and once again the Master raised the alarm and increased speed, manoeuvring to prevent the boarding of the vessel. The pirates opened fire on the bridge but quickly abandoned the attack and fled to the shore. La Mancha Knutsen headed to Bonny, where it berthed.
La Mancha Knutsen is 81,605dwt and 114,000grt with capacity to transport 173,656 cubic metres of LNG. According to databases La Mancha Knutsen is covered by Skuld through Skuld Oslo 2 for member Knutsen OAS Shipping AS, for registered owner Norspan LNG IX AS. Swedish Club is a follow-on insurer.
Gibraltar may attract insurers in the wake of Brexit
As the UK leaves the EU, Gibraltar, a British Overseas Territory, may attract insurance businesses from within the remaining EU countries looking to keep their passporting rights into the UK, Minister of Commerce Albert Isola has suggested.
Insurers based in an EU country which have passporting rights into the UK may lose this ability as a result of Brexit negotiations; around 750 insurance businesses passport from an EU country into the UK.
They may choose to exit the UK business if it is considered too small, or create a subsidiary in the UK to ensure continuity as the UK negotiates the terms of its exit from the EU. But Gibraltar may offer an alternative to these companies.
“We believe that it does open up some opportunities for us,” said Mr Isola. “We’ll be looking to see to what extent we can provide that option to those businesses.”
The strong links to UK make Gibraltar a serious alternative to creating a new subsidiary in the UK.
“The UK has already confirmed last October that arrangements for passporting post-Brexit between Gibraltar and the UK will continue,” Mr Isola said.
Gibraltar conducts around 92% of its financial services business with the UK. “It’s tried and tested,” Mr Isola said.
The associated territory offers the advantage of an easy-to-work-with jurisdiction, according to Isola. “There aren’t many jurisdictions where, when you need to meet the regulator you can ring up and go and see him the next day and discuss something new that you are planning,” he said.
Gibraltar currently has 40 active insurance companies, most of them motor insurers. The regulator adapted to the changing needs of the insurance sector as technology plays an increasing role in the business. The regulator did, for example, set up a new innovation team to assist companies in implementing new technology such as blockchain.
“I think we are well-placed for the future,” Mr Isola said.
Insurers selecting Gibraltar could also benefit from a corporate tax rate of 10% which compares with 19% in the UK.
But taxes are only one part of the equation, Mr Isola said, noting that the whole package is important, including a qualified labour force and the regulatory environment.
Other advantages are the close ties to the UK. Professionals in Gibraltar are UK-qualified; the jurisdiction uses British business practices and operates under English common law.
The arguments for setting up business in Gibraltar may have already convinced some.
Since Brexit, the regulator granted 21 licences in Gibraltar across all financial services and there are 22 in the application stage since Brexit, according to the government.
Essar fined more than US$2 million for Stanlow refinery explosion
Essar Oil (UK) Ltd. must pay a £1.65 million fine plus £57,000 legal costs following an explosion at its Stanlow oil refinery near Ellesmere Port.
The fine was included in a judgement issued at Liverpool Crown Court in relation to an incident in the early hours of the 14th November 2013.
While nobody was injured, the blast caused significant damage totalling more than £20 million.
The prosecution was brought by the Health and Safety Executive (HSE) who carried out the investigation.
Speaking after sentencing, HSE Principal Inspector Joanne Eccles said, “The industry should take notice of this case, there were no injuries but mistakes were made and could have been prevented.”
The company pleaded guilty to breaching Regulation 4 of the Control of Major Hazards Regulations 1999 and was fined £1,650,000 with costs of £57,644.80.
Problems began during the start-up of its main distillation unit, when extremely flammable hydrocarbons were allowed to enter an unignited furnace.
Heat from another nearby furnace triggered the explosion which destroyed the furnace, starting a number of fires which the fire service had to bring under control.
The incident was reported to the EU as a major accident under Schedule 7 of the Control of Major Accident Hazards (COMAH) Regulations 1999.
HSE investigators found Essar Oil (UK) Ltd. failed to take all necessary measures to prevent or mitigate a major accident with three key failings including the incorrect installation of a safety critical valve.
Essar spokesman Ian Cotton responded on behalf of the company. He said, “We made clear to the courts from the outset that we accepted responsibility for the incident.
“We take this matter very seriously. Following the incident in November 2013, measures were put in place to ensure it could not happen again.
“No one at Stanlow was hurt and there were no effects on the general public off-site.
“Although the incident happened three-and-a-half years ago, new sentencing guidelines introduced in February 2016 significantly increased the penalties previously available to the court which has been reflected in the size of the fine levied today.”
Verisk’s Property Claim Services launches marine/energy offering
Property Claim Services (PCS), a Verisk Analytics business, has launched its global marine and energy service as its first solution outside the property-catastrophe sector.
The new loss aggregation service provides industry loss estimates for ocean marine and offshore energy events likely to exceed US$250 million worldwide.
The PCS Global Marine and Energy will enable re/insurers and stakeholders in the global risk and capital supply chain to gain access to an unbiased view of the industry loss for large non-elemental events around the world.
“Our clients have been clear: the industry needs a loss aggregation solution for global marine and energy,” said Tom Johansmeyer, Assistant Vice President, PCS Strategy and Development.
“We’ve invested considerable time and effort to launch PCS Global Marine and Energy based specifically on this feedback. With a consistent, rigorous approach to loss aggregation, our new solution should help companies understand losses and transfer risk more effectively.”
Ted Gregory, Director of PCS operations, added, “Loss aggregation is important beyond property catastrophe, and we’ve developed a process focused on the specific needs of this sector while remaining consistent with the retrospective view PCS takes on loss events. As with any event, we’ll stick to a defined methodology to arrive at consistent, independent, and reliable industry loss estimates.”
Lloyd’s begins operating in India with MS Amlin as first underwriter
Lloyd’s has announced that it has begun to operate in India with MS Amlin as the first Lloyd’s business to join the branch and begin underwriting.
Lloyd’s India will act as a domestic reinsurance branch of Lloyd’s, providing capacity and expertise to support India’s growing economy with a particular focus on infrastructure, agriculture and disaster management, Lloyd’s said in a statement.
Shankar Garigiparthy will lead Lloyd’s India operations as Country Manager and CEO.
Lloyd’s decision to expand into India “will help Indian insurance firms increase the resilience of the Indian economy to catastrophic events and boost Britain’s ties with one of the world’s most exciting economies…,” said UK Chancellor Philip Hammond.
As a member of a trade delegation to boost ties between the UK and India, Mr Hammond attended the signing of a ceremonial Lloyd’s India policy, which marked the official opening of the branch office.
“Lloyd’s will help to strengthen and diversify the Indian reinsurance market, increasing the capacity, products and choice available to Indian insurers,” said John Nelson, Chairman of Lloyd’s, who also attended the event. “This will, in turn, help to create a more vibrant insurance market and increase the level of protection across the Indian economy.”
MS Amlin is the first Lloyd’s insurer to join the reinsurance branch. Additional Lloyd’s insurers are expected to join in time.
“We have a long-standing relationship with the Indian insurance market, having played a lead role in providing reinsurance to local cedents for many years,” said Hugo Bashall, CEO of MS Amlin India, who added that the company aims to make “a positive contribution to the development of reinsurance onshore….”
“The growth of India’s insurance market has not kept pace with the country’s rapid economic development, leaving many sections of the economy vulnerable in the face of significant natural catastrophe exposures,” Lloyd’s said in a statement.
“The introduction of foreign reinsurers will help to close this underinsurance gap and develop India as a centre for insurance, reinsurance and associated services,” it went on to say.
City of London will survive Brexit – even if many jobs move to continent: Official
The City of London should emerge largely unscathed from Brexit even though thousands of banking and insurance jobs could move to the continent, the financial district’s policy chief said.
The “City” or “Square Mile”, home to over 250 foreign banks and the Lloyd’s insurance market, faces upheaval as firms decide whether to shift jobs to continental Europe to keep serving customers there after Britain leaves the EU in 2019.
Mark Boleat, Head of Policy at the City of London, the local government which administers Europe’s biggest financial centre, said talk of a massive exodus has been mistaken.
“If it was going to be Armageddon, we would have noticed it by now,” Mr Boleat told reporters in an interview in a room off the local government’s seat of power in the medieval Guildhall.
“They are never all going to up sticks and leave … We expect the steady flow of new business coming in.”
This contrasts with harsher predictions, such as a report from EY consultancy forecasting a loss of 232,000 financial jobs in Britain as a result of Brexit, though with many of those from other parts of the country.
Mr Boleat steps down in May after five years in the job which included confronting protests against corporate greed and being at the heart of industry efforts to respond to Brexit, which threatens to cut London off from mainland Europe.
He predicts even in the worst-case Brexit scenario resulting in tens of thousands of financiers moving from Britain in a decade, the City – where 360,000 people are employed – will end up with the same number of jobs.
“Our projection for employment in the City is that in the next ten years there will be another 50,000 jobs or more,” Mr Boleat said, mainly in IT and professional services such as accounting and law. “If with Brexit we lose 50,000 jobs, we end up where we started.”
He said the commercial property market was a bellwether of the City’s resilience and that it was “holding up pretty well”. He pointed to a decision taken since the referendum to go ahead with a 59-story skyscraper.
“What is significant is they are building it. It is a building without a tenant. A building of that size is clearly quite risky,” he said.
Mr Boleat does not speak for London’s entire financial sector, however. The capital’s other main financial area, Canary Wharf, is home to about 112,000 jobs.
Change in Tone
Mr Boleat spoke of a rollercoaster ride of emotions for banks since the 23rd June, when Britain voted to leave the EU.
Initially, the sector hoped to keep “passporting” rights to offer services across the bloc from a single base in London. But after a few months it became clear that Britain would give up unfettered access to single market to restrict immigration.
He said the low point was at the ruling Conservative Party’s annual conference in October when Prime Minister Theresa May criticised big business and “citizens of nowhere”, widely interpreted as an attack on an international-minded elite.
“That speech was aimed at the Conservative Party and it was a pity that other people heard it,” Mr Boleat said.
Mrs May’s letter to the EU on the 29th March to kick off formal divorce talks set a more “helpful tone” by singling out financial services and the need for transitional arrangements, he said.
He senses the government is becoming more pragmatic ahead of what are likely to be tough negotiations with the EU. “Maybe there is an increasing recognition that … the other side can be bolshie and we need good relationships to get the right result,” he said.
“We have found the Treasury very good indeed. No complaints at all … The issue is whether they can get their voice heard in Number 10 (the PM’s office), where any trade-offs are needed,” he added.
Attempts to encourage European companies to warn their own governments about the economic impact of loss of access to the London’s financial sector have made little headway, Mr Boleat said.
“One thing I have learned is that we shouldn’t be looking a great deal of help from European corporates. They are as committed to the EU project as their governments.”
A company like BMW is far more worried about supply chains and tariffs, rather than market fragmentation or more expensive derivatives, he added.
Lloyd’s selects Brussels for EU subsidiary
Lloyd’s has picked Brussels for its planned European Union subsidiary.
Lloyd’s has been one of London’s financial services firms most vocal about the need for a European Union subsidiary if Britain has no access to the single market after leaving the bloc.
On the 27th March it was reported that Lloyd’s shortlist of six locations had been reduced to Brussels and Luxembourg. Dublin, Frankfurt, Malta and Paris were dropped.
Lloyd’s could move dozens of staff to its subsidiary, rather than the hundreds some banks plan to shift, sources said.
The choice by Lloyd’s could affect other insurers’ plans.
Insurers’ Brexit preparations gain momentum
As UK’s Prime Minister Theresa May signs the letter that will formally begin the UK’s departure from the European Union, the insurance industry is expected to accelerate its plans to adapt their business and move operations in order to be able to service their clients within the European Union.
“With two years on the clock until a potential Brexit, insurance companies, whether UK-headquartered or currently benefitting from passporting into the UK, simply cannot afford to wait for a deal to emerge before beginning to implement their contingency plans,” said Ashley Prebble, insurance partner at law firm Clifford Chance.
“In the coming months, we fully expect to see more insurers confirming new locations for their EU business and starting to implement the early stages of their plans to ensure that they can continue to serve their clients across the continent.”
US giant AIG has selected Luxembourg as its European headquarters while Lloyd’s of London is to create a re/insurance hub in Brussels.
Ivor Edwards, European Head of Clyde & Co’s corporate insurance group, said, “Insurers haven’t been sat waiting for Article 50 to be triggered since the referendum. Planning for Britain’s exit from the EU is well underway as insurance carriers believe they need to take concrete steps for all eventualities by setting up carrier companies in 27 EU countries.
“Carrier companies are by far the most popular and realistic solution to allow insurers to carry on writing business in the EU post-Brexit. But they require time, money and commitment to set up. Fronting arrangements can work but are complicated and not a solution for carriers who want to write significant amounts of business.”
Germany is also in the run as a potential location for insurers wanting to secure access to the EU market. The country is attractive because it is Europe’s industrial heartland and the region’s most important economy, as well as home to some of the finest insurers worldwide, according to law firm Clyde & Co. Moreover, Germany combines high regulatory standards alongside top infrastructure and fiscal stability to create a sophisticated and attractive marketplace.
France, on the other hand, has a reputation as a heavy-weight market for financial services, leading the EU in terms of technological innovation and is known as the most innovative marketplace in continental Europe for fintech and insurtech, according to Clyde & Co.
France is taking steps to attract companies relocating from the UK with a joint initiative from banking and insurance supervisors promising to speed up the licensing process.
“It’s not only UK-based companies that are affected and who are making plans,” Mr Edwards said. “There are over 500 general insurance companies headquartered in continental Europe who passport into the UK that are taking steps too.”
While the process of exiting the EU has a timetable of two years with a potential extension, the insurance industry is requesting a transitional period to allow insurers to delay the final decision on moving the business and decide upon it only when there is clarity about the final deal.
“Without these transitional arrangements, any new deal may be less relevant as the plans will have already been implemented,” Mr Prebble said.
Mr Edwards added, “The insurance industry will be hoping that the government achieves the freest possible trade in financial services between the UK and EU Member States as part of a new strategic partnership agreement. It remains in everyone’s interests that financial services can be carried out efficiently across the continent by a system which provides for mutual market access.”
Oil Insurance posts US$62 million underwriting loss
Oil Insurance Ltd. declared a US$62 million underwriting loss for last year at its annual meeting last week.
The company said, after including net investment income and administrative expenses, net income for the year totalled US$210.4 million.
Oil’s board of directors also declared a dividend in an aggregate amount of US$250 million to all shareholders of record in January, to be paid at the end of June, “in recognition of Oil’s continued financial success and solid financial condition”.
The company is an energy mutual, which is owned by companies it insures.
Oil Insurance insures more than US$3 trillion of global energy assets for more than 50 members, with property limits up to US$400 million, totalling more than US$19 billion in A-rated property capacity.
Members are all medium to large-sized public and private energy companies with at least US$1 billion in property assets and an investment-grade rating or equivalent.
Areas covered include offshore and onshore exploration and production, refining and marketing, petrochemicals, mining, pipelines, electric utilities and other related energy sectors.
The board of directors also elected Roberto Benzan as Chairman and Theo Guidry as Deputy Chairman.
Mr Benzan said, “The US$250 million dividend demonstrates the board’s commitment to return value to Oil’s shareholders when it is prudent to do so.
“Oil is firmly footed on a tremendously strong foundation established over its 45-year history. Over that time frame, the company has steadfastly focused on shareholder value.
“The board is excited about pursuing our strategic plan as it will further strengthen our overall shareholder value proposition.”
Neon launches marine and offshore construction consortium with Lloyd’s capacity
Specialist Lloyd’s insurer Neon has launched a new marine and offshore construction consortium which offers US$70 million capacity for shipyard construction and US$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.
Hannover Re snaps up Lloyd’s syndicate holding Argenta
German insurer Hannover Re has reached an agreement to acquire the entire share capital of the UK holding company Argenta, which owns Lloyd’s managing agent Argenta Syndicate Management and Argenta Private Capital, as well as pro rata share of the Lloyd’s Syndicate 2121.
The transaction is expected to close in the third quarter of 2017 subject to all necessary approvals.
“For some time now we have been interested in a Lloyd’s syndicate with a view to gaining additional access to international and London Market business. We are delighted to have found an ideal partner in Argenta,” said Ulrich Wallin, Chief Executive Officer of Hannover Re.
The syndicate 2121 focuses on short-tail property business and specialty lines. In the 2016 financial year it booked gross premium of £280 million.
Canada’s Eagle Underwriting teams up with MS Amlin’s RaetsMarine
Canada’s Eagle Underwriting Group Inc. has teamed up with MS Amlin Marine NV, trading as RaetsMarine, to offer protection & indemnity (P&I) and charterers’ liability insurance in the Canadian marine market.
Established in 1996, Eagle Underwriting is a Brampton, Ontario-based managing general agency which offers insurance coverages for “things which move”, such as marine and truck cargo, aviation and unmanned aerial vehicles (UAV), marine hull, marine liabilities, logistics providers, environmental liability, political risk and trade disruption insurance.
Launched in 1993, RaetsMarine is a managing general agent who specialises in P&I insurance and charterers’ liability insurance. The Rotterdam-based company was purchased by Amlin in 2013.
Eagle Underwriting will offer P&I and charterers’ liability insurance on behalf of RaetsMarine.
“Our mutual expertise in combination with the bespoke insurance solutions that we offer results in what we believe to be a fresh and unique proposition to the Canadian market,” said Bernie Cissek, Chairman of Eagle Underwriting.
“The cooperation with Eagle Underwriting provides us an excellent gateway to the Canadian market,” said Bert Scheper, Underwriting Director of RaetsMarine.
People on the Move
Barbican bolsters energy team with new hire from Starr
London-based Lloyd’s insurer Barbican has appointed Marc Sullivan as a class underwriter for downstream energy.
In his new role, Mr Sullivan will report to Divisional Head of Energy, Power and Utilities Olivier Decombes.
Mr Sullivan joins Barbican from Starr Underwriting Agents, where he was an onshore energy senior underwriter across oil, petrochemical and chemical lines of business.
Chubb bolsters MENA underwriting team with new appointments
Insurer Chubb has made four appointments to its underwriting team in Middle East and North Africa (MENA) as it continues to build its insurance capabilities in the region.
Adam Groves, currently the senior underwriter, oil and energy, for Chubb in MENA, has been promoted to the role of regional manager, oil and energy MENA. In his new role, Mr Groves will develop the company’s underwriting industry strategy and have responsibility for its implementation across the region, leading the growth and profitable development of Chubb’s energy portfolio in MENA. He will continue to be based in Dubai, reporting to regional managing director for Chubb in MENA, Mojgan Khoshabi.
Mr Groves joined Chubb’s MENA team in 2014 as energy senior underwriter.
Iheb Ghileb, currently the property and terrorism underwriter for Chubb in MENA, has been promoted to the role of senior property and terrorism underwriter. In his new role, Mr Ghileb will continue to be based in Bahrain. He joined Chubb in 2013 as property and construction underwriter in the company’s Tunis office.
Batool Ali, currently assistant underwriter, oil and energy, MENA, has been appointed to the role of assistant underwriter of property, MENA. Based in Bahrain, Ms Ali will have the responsibility for both fire and political violence product lines. She joined Chubb in 2010.
Mr Ghileb and Ms Ali will report to Warda Habib, Regional Property Underwriting Manager in MENA.
Jack Watson has been appointed to the role of assistant underwriter, oil and energy, MENA. He will be based in based in Dubai, and report to Adam Groves. He relocated to Dubai in 2013 from the UK and has built a wide range of experience and knowledge of the market and culture in the region. Prior to joining Chubb, Mr Watson held underwriting roles at Liberty and United Insurance.
Lloyd’s Acappella Syndicate appoints head of reinsurance
Acappella Syndicate 2014 has promoted Jim Quinn to the new role of Head of the Reinsurance Division, and Matthew Bellamy to the position of Head of Property Reinsurance.
Mr Quinn joined Acappella Syndicate 2014 in December 2013 to build the casualty reinsurance portfolio for its first year of account in 2014.
Prior to joining Acappella Syndicate in April 2014, Mr Bellamy worked for MS Amlin as a North American property treaty underwriter, specialising in catastrophe and per risk excess of loss structures.
Martin Eyres appointed underwriting director at Barbican
The UK division of Barbican Insurance Group, Barbican Protect, has named Martin Eyres as Underwriting Director. Mr Eyres will report to Managing Director Stuart Kilpatrick.
Mr Eyres previously served as underwriting manager at Mitsui Sumitomo, where he headed the UK and Ireland property strategic business unit for Syndicate 3210 and was head of their UK and Ireland regional property and casualty business.
Energy Training Course 2017
There are still spaces available for the Price Forbes Energy Training Course, which is taking place the 8th – 12th May in London.