Energy Review 08-2017
31 August 2017
About three years ago the price of a barrel of oil started to fall. Many people felt that this was a blip and it would soon correct itself; few realised that it would take several years for the price to increase slightly and then level out well below what most people thought the energy industry could cope with easily.
Now that most people accept that the price of oil is not going to increase quickly or dramatically, knee-jerk measures have tailed off and long-term adjustments in the strategy of nearly all of the players in the industry appear more settled. Over-production of oil and the increase in supplies of gas have not helped, but capital expenditure and exploration costs have been cut as most firms tighten their belt. That being said, there are still observers who feel that the industry is in the doldrums; hence articles like “No magic wand for offshore market recovery” pose a rather negative view for the future. Another article entitled “Witnessing the ongoing transformation of the oil and gas industry” offers a slightly less pessimistic opinion which can be summarised as: “Adjust or be doomed”.
Two developments are evidence of changes in direction: firstly, it has been reported that European oil majors are seeking to harness US offshore wind, and secondly, more specifically, Shell is said to be preparing for a world economy which shifts away from oil. Oil rig construction is experiencing a downturn, and exploration for gas is becoming more and more popular as exemplified by developments in Southeast Asia where gas has dominated discoveries in the year to date.
We have witnessed a couple of incidents which fortunately have fizzled out. On behalf of the Vietnamese government, Repsol had been drilling in the South China Sea until China started to puff out warnings. Repsol duly stopped its activities and in doing so, gave away the initiative but avoided an awkward confrontation. North Korea pushed its luck when it tested yet another missile; the USA responded by saying they were prepared to use the full range of their capabilities to defend themselves and their allies. In both cases, we do not know what goes on behind the scenes but something ugly could have happened.
There has not been any real progress with Brexit negotiations, and from a London versus EU standpoint, London has seen Hannover Re purchasing a Lloyd’s agency and AXIS forming one while Dublin has seen Berkshire Hathaway and Beazley opening offices.
As always, there are interesting market moves to report on as we head towards the end of the European summer holidays. There are always promotions and departures, arrivals and new career pathways. We have plenty of news for our readers and hope that this will all prove interesting and informative for everyone.
Fatality at Alberta drilling site
An oilfield worker died on the 3rd August at an Alberta drilling site after being struck in the head by a pipe during a pressure test.
The incident occurred at the Karve Energy-operated site near Consort as workers were pulling the test pipe out of the wellbore. The pipe was under pressure and hit the 35-year-old Calgary man in the head, a spokesperson for Alberta Occupational Health and Safety (OHS) said.
The Element Technical Services employee died at the scene.
Royal Canadian Mounted Police responded to the scene but handed the investigation over to Alberta OHS. The probe could take up to two years, the spokesperson said.
Neither Karve nor Element have a history of safety violations in Alberta, the spokesperson said.
Privately-held Karve is focused on the Viking oil play.
Fire shutters Shell’s Pernis refinery
Royal Dutch Shell plc has shut down refining operations at subsidiary Shell Nederland Raffinaderij B.V.’s 404,000-b/d Pernis refinery and integrated petrochemical production site in Rotterdam, following a power outage which resulted in an explosion and subsequent fire at the plant.
At about 10:30 p.m. local time on the 29th July, a power failure occurred in a high-voltage power station at the industrial site, sparking an explosion and ensuing fire which burned until about 5:52 a.m. on the 30th July, according to a series of releases from Rijnmondveilig.nl, the official emergency alert service for the Rotterdam-Rijnmond area in the province of South Holland.
While some units were shuttered immediately in the wake of the incident, the operator decided to undertake the safe and controlled shutdown of most units at the refinery beginning about midday on the 30th July after evaluating impacts of the power outage and resulting loss of electricity supply, said Shell and DCMR Milieudienst Rijnmond – the joint environmental protection agency for South Holland province – in separate releases.
No injuries were reported following the event, but unit closures have led to increased flaring at the refinery, the operator confirmed.
Shell has yet to disclose further information about the incident, including details regarding any possible impacts to unit equipment or a timeline for when it will resume operations at the site.
According to reports, Shell began restarting one of its two crude distillation units on Friday 11th August.
The explosion and fire comes just a day after Shell Nederland announced delivery of a major piece of equipment for the new solvent de-asphalting (SDA) unit now under construction at the Pernis refinery.
The operator received a 30-metre-high furnace built by Mammoet Europe B.V., Schiedam, which is to be followed in by delivery of the last two distillation columns for the SDA project sometime in August, Shell said in a release on the 28th July.
Approved by the company in late 2015, the new SDA unit will be equipped with KBR, Inc.’s proprietary residuum oil supercritical extraction (ROSE) technology to remove heavier fractions from and upgrade a larger portion of the refinery’s crude feedstock into lighter, high-grade products.
The SDA unit remains on schedule for start-up in 2018, according to Shell.
Exxon Rotterdam refinery fire
On Monday 21st August ExxonMobil Corp said that a fire broke out at its refinery in Rotterdam but that there were no injuries and most of the facility remained operational.
The fire erupted in the powerformer unit of the complex and some flaring occurred to reduce pressure, Exxon said, adding it was cooperating with local emergency personnel.
The complex can process about 190,000 barrels per day and the rest of the refining units and a connected chemical plant were still online, Exxon said.
“We regret the incident and any inconvenience caused to the community,” Exxon spokeswoman Ellen Ehmen said in an emailed statement.
The fire came the same day that a blaze broke out at a Royal Dutch Shell (RDSa.L) refinery in the Netherlands. That fire was quickly contained.
Exxon last year started a $1 billion, three-year expansion of the Rotterdam refinery to boost production of lubricants and other chemicals. According to a proposal for the expansion filed with Dutch authorities, hydrocracking capacity at the plant would increase by 40% to about 70,000 barrels per day.
Eni takes blame for oil and tar balls on UK beaches
Eni has reportedly taken responsibility for oil and tar balls that have washed up along the coast from Cleveleys to Fleetwood, at Knott End, and in Blackpool in England.
On the 19th July, Wyre Council said it was working with the Maritime and Coastguard Agency (MCA) to establish the extent of the pollution and carry out a clean-up operation.
According to Blackpool Council Eni has accepted the blame for the oil and tar balls on the beaches in Liverpool Bay.
Blackpool Gazette reported the analysis of the washed up material showed the Eni-run Douglas Complex as the origin. The Douglas complex is a 54-metre-high system of three linked platforms in the Irish Sea.
A news website had managed to obtain a statement from Eni, which said the oil came from an oil storage tanker, located ten miles from the Douglas installation.
A spokesperson for the Maritime and Coastguard Agency (MCA) said the MCA had been made aware of spots of what appears to be heavy oil and tar balls being washed up on Bispham Beach during the early evening of the 16th July, subsequently launching a coordinated response.
“We have received the initial analysis of the tar ball and comparison samples from the Offshore Installation (OSI). Detailed analysis of the aromatic hydrocarbons and biomarker compounds indicate that the tar ball sample is a strong match with both comparison samples provided,” the spokesperson said.
In the meantime, as a precaution, bathing is not advised at Fleetwood, Cleveleys, Bispham, Blackpool North, Blackpool Central and Blackpool South bathing waters.
Members of the public can still go on the beach but should keep clear of the pollutants. Members of the public are being advised not to touch, or pick up, the pollutants, Blackpool Council said.
An Eni spokesperson said, “Eni UK Limited can confirm that tar balls seen on the beach between Blackpool and Fleetwood are linked to a limited release of fluids (a mix of water and hydrocarbons) which occurred at its Oil Storage Installation (OSI) at its Liverpool Bay facilities over 30 kilometres offshore on the 10th July 2017. The source of the release was quickly identified isolated and shutdown the same day.”
The spokesperson said that Eni UK Limited had immediately mobilised an incident management team and “has been working closely with the relevant authorities over the past week to manage the situation and minimise any impact on the environment.”
The actions taken have included dispersant trials and vessel prop washing – where vessels break up and disperse oil with their propellers.
Eni UK Limited continues to monitor the situation with aerial and vessel surveys, Eni said.
“We have asked our specialist contractor Braemar Response to devise a shoreline response plan. This has been shared with the Local Authorities and Lancashire Fire and Rescue Service. The plan includes deploying expert resources, conducting sampling, where required and mobilising shoreline patrols. Our teams are now on the beach removing any tar balls found. A full onshore response will continue for as long as is necessary with Eni UK Limited fully supporting the Local Authorities as necessary,” Eni said.
Hebron gas pipeline fire prompts evacuation of 20 residents
About 20 people were evacuated from their homes in Hebron, North Dakota, when workers digging holes for fence posts struck a natural gas pipeline and started a fire.
No injuries were reported in the incident on the 18th July. The Bismarck Tribune reported damage was limited to some fencing and a shed.
Montana-Dakota Utilities said the incident cut off service to some natural gas customers for a time.
Fire causes explosion at oilfield plant near Yorktown
Local fire-fighters responded to a fire and explosion at an oil and gas facility in rural DeWitt County on the 5th July.
According to local officials, the fire happened at about 5:45 p.m. for unexplained reasons at a saltwater disposal lease at a location on West State Highway 72, about three miles north-east of Yorktown.
The highway was closed to traffic while fire-fighters put out grass fires ignited in the area. By 6:59 p.m. all the grass fires had been extinguished. Air quality was continually monitored for the safety of all persons in the area.
Responding fire departments decided to let the fire burn itself out. At about 7:15 p.m. a tank on the site exploded as a result of the heat from the blaze.
The highway was re-opened at 10:00 p.m. on the 5th July. Crews remained on scene throughout the night to monitor the fire and were expected to fully extinguish the fire the next morning.
No injuries were reported to workers on sight or any responding fire-fighters. The cause of the fire has not been determined and will be investigated by the Texas Commission on Environmental Quality and the Texas Railroad Commission.
The International Maritime Bureau (IMB) publishes its second quarter report on piracy and armed robbery for 2017
The IMB has published its report on piracy and armed robbery for the second quarter of 2017, covering the period from the 1st January to the 30th June 2017. The report highlights continuing decline in the number of incidents of maritime piracy.
87 incidents have been reported in the first six months of 2017, with 63 ships boarded, eight attempted attacks, four ships hijacked and 12 ships fired upon. This represents a decrease from 2016 when there were 97 reported incidents in the same period.
In relation to crew, the IMB reports that 63 crew members were taken hostage, three injured, two killed and 41 kidnapped.
The majority of the 87 reported incidents occurred in the following four countries:
The IMB reports a decline in the number of reported incidents in and around the Philippines with four cases for the second quarter compared with nine in the first. This reduction is attributed to the cooperation between Indonesia, Malaysia and the Philippines.
Gulf of Guinea/Nigeria
Nigeria accounts for 13 incidents, down from 24 for the same period in 2016. Nigeria remains a kidnap hotspot with 31 crewmembers taken in two separate incidents. Violence against crewmembers continues with Nigeria accounting for half of the ships fired upon worldwide. The IMB urges ship masters to report all incidents so that the true level of piracy activity can be assessed.
Gulf of Aden/Somalia
Seven incidents have been reported off Somalia in 2017, including three ships being hijacked. This indicates that Somali pirates still have the capability and capacity to carry out attacks. The IMB urges ship masters to maintain high levels of vigilance when transiting the high-risk area and adhere to the Best Management Practices (version 4).
Attack by ship-type
The main ship-types affected are as follows:
- Product tanker: 19 incidents
- Bulk carrier: 18 incidents
- Chemical tanker: 7 incidents
- General cargo: 7 incidents
Chevron to spend US$20 million in safety upgrades in wake of fire
Chevron Corporation and state regulators have reached a settlement related to a 2012 fire at its Richmond refinery which will require the company to spend about US$20 million on safety improvements, officials announced on the 24th July.
The agreement requires Chevron to replace all carbon steel piping which transports corrosive liquids with chrome-alloy piping, which is better at resisting corrosion. Chevron will also have to implement procedures to monitor equipment that alerts operators when replacements are needed, the state’s workplace safety agency, the California Occupational Safety and Health Administration (Cal/OSHA), said in a statement.
“This means safer operations at the refinery, which will help protect refinery workers and those who work and live nearby,” Cal/OSHA Chief Juliann Sum said.
In 2013, the state fined Chevron nearly US$1 million after a fire at the company’s Richmond refinery sent a cloud of gas and black smoke over residential areas.
Investigators found “wilful violations” in Chevron’s response before, during and after the fire on the 6th August 2012 caused by an old, leaky pipe in one of the facility’s crude units which the company had neglected to replace, even after inspecting areas near the segment which failed less than a year earlier.
Cal/OSHA also said at the time that the company did not follow recommendations its own inspectors and scientists had made in 2002 to replace the corroded pipe which ultimately ruptured and caused the fire.
Smoke and gas from the blaze prompted thousands of people to seek medical treatment, with many complaining of eye irritation and breathing problems. No workers were seriously injured in the incident.
Maritime chokepoints are critical to global energy security
The US Energy Information Administration has released its 2017 World Oil Transit Chokepoints report.
Chokepoints are narrow channels along widely used global sea routes for oil transport, with some so narrow that restrictions are placed on the size of the vessel which can navigate through them.
The inability of oil tankers to transit a major chokepoint, even temporarily, can lead to substantial supply delays and higher shipping costs, resulting in higher world energy prices.
While most chokepoints can be circumvented by using other routes which add significantly to transit time, no practical alternatives are available in some cases. Chokepoints may also expose oil tankers to theft from pirates, terrorist attacks, political unrest, and shipping accidents.
By volume of oil transit, the Strait of Hormuz (leading out of the Persian Gulf) and the Strait of Malacca (linking the Indian and Pacific Oceans) are the world’s most important strategic chokepoints. The Cape of Good Hope, near the southern tip of Africa, is a major oil trade route and potential alternate route to certain chokepoints.
Ships carrying crude oil and petroleum products transiting certain chokepoints are in some cases limited by size restrictions. The global crude oil and refined product tanker fleet is typically classified using the Average Freight Rate Assessment (AFRA) system which was first established by Royal Dutch Shell many years ago and is now overseen by an independent group of shipping brokers.
The AFRA system classifies tanker vessels according to deadweight tons – a measure of a ship’s capacity to carry cargo. The approximate capacity of a ship in barrels is determined using an estimated 90% of a ship’s deadweight tonnage, which is multiplied by a barrel-per-metric-ton conversion factor specific to each type of petroleum product and crude oil, because liquid fuel densities vary by type and grade.
Long Range (LR) class ships are the most common ships in the global tanker fleet, as they are used to carry both refined petroleum products and crude oil. These ships can access most large ports which ship crude oil and petroleum products. An LR1 tanker can carry between 345,000 barrels and 615,000 barrels of gasoline (14.5–25.8 million gallons) or between 310,000 barrels and 550,000 barrels of light sweet crude oil. An LR2 tanker can carry 600,000 to 900,000 barrels of a petroleum product like gasoline, diesel or light sweet crude oil.
Additional ship categories, including the Very Large Crude Carrier (VLCC) and the Ultra-Large Crude Carrier (ULCC), were added to the AFRA classification system as larger vessels with better economics for crude oil shipments were deployed to serve expanded global oil trade. VLCCs are responsible for most crude oil shipments around the globe and can carry between 1.9 million and 2.2 million barrels of a West Texas Intermediate-type crude oil.
Some chokepoints, such as the Strait of Hormuz, are sufficiently deep and wide to accommodate all sizes of vessels. However, ships transiting the Panama and Suez canals are subject to depth and width restrictions. Tanker traffic through the Bab el-Mandeb and Turkish Straits do not face specific size restrictions, but they must deal with relatively narrow, difficult-to-navigate sea lanes.
AXIS forms Lloyd’s managing agency
AXIS Capital Holdings has announced that it will launch its own Lloyd’s managing agency.
The company has received the necessary final authorisation from Lloyd’s, the Prudential Regulation Authority and the Financial Conduct Authority, according to a news release.
Starting on the 4th August, AXIS Managing Agency will assume management of AXIS Syndicate 1686 at Lloyd’s, the company reported. The new managing agency will replace the company’s existing third-party managing agency agreement with Asta Managing Agency Limited.
AXIS Syndicate 1686 underwrites specialist classes including marine, energy, terrorism, aviation, property, casualty, professional indemnity and reinsurance, the company said.
AXIS Managing Agency will give AXIS a direct relationship with Lloyd’s, allowing it to take advantage of Lloyd’s worldwide licences and distribution network, according to the release.
The launch of the managing agency is AXIS’s latest move to expand its London presence and its Lloyd’s operations. The company also recently announced that it had made an offer to acquire Novae Group, a specialty reinsurer operating through Lloyd’s.
Lloyd’s syndicate Blenheim enters specialty reinsurance
Blenheim, managed by Asta, has appointed John Cutts to develop a specialty reinsurance division within its Syndicate 5886 at Lloyd’s.
Mr Cutts will take up his role in 2018 upon concluding his existing responsibilities at Talbot Underwriting, where he has worked for the past 17 years, serving as head of treaty underwriting for Syndicate 1183 for more than a decade.
Ironshore Pembroke Managing Agency launches cargo consortium on Lloyd’s China
Ironshore’s Pembroke Managing Agency has launched a project cargo consortium to serve the Lloyd’s China platform, offering a capacity of up to US$178 million.
Tracy Ma, Pembroke Underwriting Manager, Lloyd’s Insurance Company China, will lead project cargo underwriting for the Lloyd’s China platform, based in Shanghai. Ms Ma will work with Andrew Corton, Global Head of Marine Cargo, based in London.
Pembroke Lloyd’s Syndicate 4000 offers coverage for risk exposure and consequential loss related to project cargo transportation and delay in start-up for large scale project risks triggered by China’s foreign policy mandate, Belt and Road Initiative, launched in 2013.
The initiative calls for China to underwrite billions of dollars of infrastructure investment in countries which link the Silk Road with Europe.
NAPSLO and AAMGA members OK merger to form new Wholesale & Specialty Association
Members of the American Association of Managing General Agents (AAMGA) and the National Association of Professional Surplus Lines Offices (NAPSLO) have approved a merger of the two associations, creating the new Wholesale & Specialty Insurance Association (WSIA).
According to the joint announcement, 89% of the AAMGA’s votes and 93% of NAPSLO’s votes were in support of the merger and affirmed the creation of the WSIA, effective the 1st August 2017.
The AAMGA said it received 270 of 348 eligible member votes, representing a 78% quorum of its membership.
NAPSLO said it received 241 of 452 eligible member votes, representing a 53% quorum of its membership.
“WSIA has been developed through a very thoughtful and purposeful process,” said Hank Haldeman, Merger Committee Chairman. He said members voted for more than a simple merger of the two existing organisations. Instead they have “endorsed the creation of a new world-class member services association which will serve the entire wholesale, specialty and surplus lines industry.”
Mr Haldeman said the merger committee envisioned an association which will offer members even greater services and value in one new organisation.
The WSIA will be governed by a board of directors which includes both legacy organisations’ members.
Corinne Jones, AmWINS Access, will serve as President. “It is an honour to serve as the first president of WSIA, and I’m looking forward to the work which is ahead,” Ms Jones said.
“This merger is not simply a refresh or rebrand of two legacy organisations, but a brand-new association dedicated to developing and strengthening the wholesale, specialty and surplus lines insurance industry.”
“This is an exciting time for our association,” said NAPSLO President Dave Leonard.
In April, boards of directors for both the AAMGA and NAPSLO approved the merger proposal, an agreement and plan of merger, and a board resolution to merge.
The merger proposal outlined the material terms in connection with the merger of the AAMGA and NAPSLO, outlined the process and timing of the merger and documented the terms and conditions applying to the merger.
The WSIA will become operational on the 1st August and the integration of programmes and events will begin immediately.
One of the first opportunities to participate at the WSIA will be at the WSIA Annual Marketplace, formerly the NAPSLO Annual Convention, in San Diego from the 10th to the 13th September.
“Members will see the WSIA brand incorporated into all programmes and services in coming months, as we offer a combined slate of education programmes which includes all the same opportunities each organisation has traditionally offered,” said Brady Kelley, WSIA Executive Director.
Mr Kelley said the WSIA will also continue its forum for its under-40 members by combining the programming and events of the AAMGA’s Under Forty Organisation and NAPSLO’s Next Generation into the WSIA’s U40.
ProSight teams up with International Special Risk for marine programme
US-based niche insurance provider ProSight Specialty has launched an all-lines marine contractors insurance programme to unify maritime construction coverage under a single carrier.
ProSight has partnered with International Special Risk, the largest marine intermediary insurance broker on the East Coast, for the new programme designed specifically for the marine contractors.
According to the company, the new offering streamlines the claims procedure, and offers a range of coverages including marine general liability, workers’ compensation and US Longshore & Harbormans, contractor’s equipment, hull and machinery, protection and indemnity plus marine employers’ liability, property, auto, excess (Bumbershoot) liability.
Marine and energy insurer sets in motion new offshore advisory committee
Marine and energy insurance association, the Standard Club, has launched the Offshore Advisory Committee (SCOAC) in an attempt to drive developments in offshore protection and indemnity cover (P&I).
The Standard Club said that SCOAC would analyse offshore trends, assist the club in further understanding and disseminating industry best-practice, and develop new strategies to provide a focused direction for the benefit of the club’s offshore membership.
The new committee consists of offshore players including Allseas Group, Bumi Armada, Floatel International, Nortrans Offshore, Saipem, SBM Offshore, and Subsea 7 – all members of the Standard Club.
According to the association, the members of the committee are senior figures in the offshore industry with extensive experience and knowledge allowing them to provide invaluable insight to the committee which, in turn, will be shared with the wider membership.
SCOAC is in charge of reviewing current issues and challenges affecting key sectors in the offshore industry including production, drilling, accommodation, constructions/installation, support/supply, and other specialist operations.
The committee will also consider the implications of new regulations coming into force, offshore contracting trends, and other topical subjects affecting the offshore industry.
James Bean, Managing Director of Standard Europe, said, “Through its broad range of covers and diverse membership supported by high limits of cover, the club is well positioned to launch an Offshore Advisory Committee bringing together leaders in this sector to work collaboratively on industry issues affecting our members.”
Claire Bromley, Head of Insurance at Subsea 7, said, “SCOAC reinforces The Standard Club’s commitment to understanding and appreciating the evolving needs of its members and in looking for ways in which to further support these. As chairman, I am looking forward to working together with the rest of the committee to ensure SCOAC is a success.”
The Standard Club added that the remaining members of the Offshore Advisory Committee are Jonathan Cassidy from SBM Offshore, Suchitra Narayanan from Bumi Armada Berhad, Johann Preller from Allseas, Bertrand Valentin from Saipem, Trond Kyrkjeboe from Nortrans Offshore, and Thony Lindström Härdin from Floatel International.
Hannover Re boosts access to London market with Lloyd’s agency purchase
German insurer Hannover Re has completed the acquisition of Lloyd’s managing agent Argenta Holdings.
The company stated that through the acquisition, Hannover Re has gained additional access to international and London Market business.
The UK holding company Argenta owns Argenta Syndicate Management and Argenta Private Capital, as well as a pro rata share of the Lloyd’s syndicate Argenta Syndicate 2121.
Syndicate 2121 focuses on short-tail property business and specialty lines. In the 2016 financial year it booked gross premium of £280 million.
Hannover Re had announced an agreement to acquire the entire share capital of Argenta Holdings back in March.
Global cyber-attacks could trigger economic losses on par with catastrophic natural disasters
A major, global cyber-attack could trigger an average of £41 billion of economic losses, a figure on par with a catastrophic natural disaster such as US Superstorm Sandy in 2012, Lloyd’s said in a report on the 17th July.
The report, co-written with risk modelling firm Cyence, examined potential economic losses from the hypothetical hacking of a cloud service provider and cyber-attacks on computer operating systems run by businesses worldwide.
Insurers are struggling to estimate their potential exposure to cyber-related losses amid mounting cyber risks and interest in cyber insurance. A lack of historical data on which insurers can base assumptions is a key challenge.
“Because cyber is virtual, it is such a difficult task to understand how it will accumulate in a big event,” Lloyd’s Chief Executive Inga Beale told reporters.
Economic costs in the hypothetical cloud provider attack dwarf the £6 billion global cost of the WannaCry ransomware attack in May, which spread to more than 100 countries, according to Cyence.
Economic costs typically include business interruptions and computer repairs.
The Lloyd’s report follows a US government warning to industrial firms about a hacking campaign targeting the nuclear and energy sectors.
In June, an attack of a virus dubbed “NotPetya” spread from infections in Ukraine to businesses around the globe. It encrypted data on infected machines, rendering them inoperable and disrupted activity at ports, law firms and factories.
NotPetya caused US$850 million (£650 million) in economic costs, Cyence said.
In the hypothetical cloud service attack in the Lloyd’s-Cyence scenario, hackers inserted malicious code into a cloud provider’s software which was designed to trigger system crashes among users a year later. By then, the malware would have spread among the provider’s customers, from financial services companies to hotels, causing all to lose income and incur other expenses.
Chubb sets up global cyber risk practice
Chubb is creating a standalone cyber risk business under Bill Stewart as Division President.
The global cyber practice will deliver Chubb’s risk transfer, loss mitigation and incident response services for the rapidly evolving threats faced by businesses of all sizes and individuals.
In his new role as division president of Chubb’s global cyber risk practice, Mr Stewart will lead the development and implementation of Chubb’s strategy to deliver the next generation full suite of property/casualty cyber insurance offerings, worldwide.
He will collaborate with David Cowart, Chubb’s Chief Information Security Officer and the enterprise risk management team in developing cyber security best practices for the company.
Based in New York, Mr Stewart will report to John Lupica, Vice Chairman, Chubb Group, president of North America major accounts and specialty insurance.
The company further announced that Michael Tanenbaum, Executive Vice President, North America Cyber Practice, will spearhead the practice in North America and report jointly to Mr Stewart and Scott Meyer, Division President, North America Financial Lines.
Tim Stapleton, Senior Vice President, Cyber Product Manager and technology practice lead for Chubb’s Overseas General Insurance division will lead the cyber practice outside North America and report jointly to Mr Stewart and Tim O’Donnell, Chief Operating Officer, Property and Casualty, and Executive Vice President, Financial Lines, Overseas General Insurance.
Messrs Tanenbaum and Stapleton will be responsible for coordinating strategic initiatives around the company’s cyber risk underwriting, services and operations in their respective regions.
Beazley and Berkshire Hathaway pick Dublin for EU subsidiary
Lloyd’s specialist insurer Beazley has received authorisation from the Central Bank of Ireland to convert its Dublin-based reinsurance company into an insurance company permitted to transact business throughout the European Union.
The renamed company, Beazley Insurance dac (Designated Activity Company), will provide access to European insurance markets alongside that afforded by Lloyd’s, which announced plans in March to establish a new Brussels-based insurance company capable of writing European business for the renewal season from the 1st January 2019.
Beazley established Beazley Reinsurance Designated Activity Company (dac), for internal reinsurance transactions in Dublin in 2009. But it said it chose Ireland because it offered the option to develop business in Europe. It also said that plans to expand the company’s remit to underwrite non-life insurance formed part of Beazley’s strategy for European growth developed in 2015 and early 2016, predating the British referendum vote to withdraw from the EU last June.
Continental Europe currently accounts for just over five percent of Beazley’s total business but the region is a focus for growth for the firm. Within Beazley’s specialty lines division, a team headed by Gerard Bloom has been developing a suite of products for European markets, reflecting Beazley’s deep expertise in professional indemnity, management liability, financial institutions and cyber risks.
Berkshire Hathaway Specialty Insurance Company has also established a new office in Dublin, and appointed Cormac McNamara as Property/Casualty Manager of BHSI Ireland.
Fight over abandoned oil wells in Canada may go to top court
A battle over whether energy-company creditors should help pay for cleaning up thousands of abandoned oil wells in Canada may be heading to the country’s Supreme Court.
At the centre of the dispute is RedWater Energy Corporation, a small publicly traded oil producer in Alberta which filed for bankruptcy in late 2015. The receiver who is liquidating the company argues it should be able to sell its best wells and leave the worst behind for an energy industry-funded group to clean up. The province’s regulator argues that buyers should have to take both good and bad wells, even if it means that the sale proceeds will be lower.
A court in Alberta sided with the receiver in May 2016, reducing companies’ concerns about the legal liability of walking away from some of their oil wells. Since then, the number of inactive, abandoned, or otherwise orphaned sites has more than doubled to 3,200, according to the Orphan Well Association, the clean-up group. The provincial government has given the organisation an emergency loan to fund the growing costs.
Typically, proceeds from liquidating assets go to pay back creditors. Any decision which results in lenders getting less money in bankruptcies could ultimately force banks to charge more for financing, as they try to recoup lost income. But if the lower court’s ruling stands, the industry-funded Alberta Energy Regulator may have to collect more money from energy companies to help pay for the remediation, and the public may need to shoulder some of the burden.
“At the end of the day it is really a decision about where the money goes,” Kyle Kashuba, a lawyer in Torys LLP restructuring practice, said from Calgary.
The problem is increasingly urgent for Alberta as more oil companies go broke. The price of crude oil plunged more than 75% between June 2014 and February 2016. Even if prices have recovered somewhat since then, many drillers are not making enough revenue to keep operating. West Texas Intermediate oil traded at US$49.85 in New York at 8:37 a.m.
Since the start of 2015, 250 North American oil and gas producers and services companies have filed for bankruptcy, law firm Haynes and Boone said in April reports. About 1,000 oil sites in Alberta with liabilities of more than C$56 million (US$44.8 million) have been renounced since the May 2016 court decision, according to the Alberta Energy Regulator.
“Disclaiming unprofitable sites allows a company to reap the benefits of producing Alberta’s natural resources while avoiding the costs to repair the land, permanently impacting the environment, the economy, and the safety of Albertans,” said Ryan Bartlett, a spokesman for the Alberta Energy Regulator.
The government-run Alberta Energy Regulator and the Orphan Well Association, who say they are protecting regulatory and public interests, have appealed the matter to the Supreme Court of Canada. The high court decides which cases to hear based on which are most in the national interest.
The questions about who should bear environmental costs, combined with the importance of the lower court’s decision and the implications for the industry means the Supreme Court is likely to look at this case, Torys’ Kashuba said.
“It does have ramifications for other provinces. That makes me think the Supreme Court will hear it,” he said. “It’s kind of become such a major issue.”
The Orphan Well Association has tripled its annual budget to C$45 million for the upcoming year, compared with its 2014-15 budget, paid for by levies on companies in the industry.
The group wants the corporations’ obligations to be balanced with taxpayers’ and creditors’, said Brad Herald, Chairman of the association. “We think there was a good balance there,” he said. “These court decisions upset that balance.”
Lenders benefit from the recent decisions because they are protected from the liabilities of the non-producing wells, which could impact their recovery in bankruptcy, said Geoffrey Richards, New York-based head of North America debt finance and restructuring at investment bank Canaccord Genuity.
“I think that from a cost of capital perspective, had the decision gone in the other direction, you could anticipate that lenders might then begin to price that risk into new loans, which could have a different impact on the industry,” he said.
People on the Move
Markel hires political risk underwriter from Sompo Canopius
Specialist insurer Markel International has appointed Alex Holcroft as Political Risk Underwriter in Singapore.
Mr Holcroft will join the company’s existing trade credit and political risk team serving the Asia Pacific region, and will report to Nicola Marriage, Senior Underwriter in London.
In his new role, Mr Holcroft will focus on expanding the political risk and structured trade credit business.
He joins Markel from Sompo Canopius where he was an underwriter in the political risk and structured trade credit team.
Pioneer boosts marine team with new hire from IGI UK
Pioneer Underwriters, the underwriting group within Minova Insurance, has appointed Stephanie Doggart as Marine Underwriter within its preferred partners team.
Based in London, Ms Doggart will report directly to Sophie Chapman, Head Underwriter of preferred partners.
Ms Doggart most recently served as a ports and terminals and marine liabilities underwriter with IGI UK.
Markel hires executive to lead new Lloyd’s India business
Specialist insurer Markel International has appointed Deepika Mathur to lead its entry into the Indian market.
The capacity for the forthcoming Indian entity will be provided by Markel’s Syndicate 3000 at Lloyd’s and written through the Lloyd’s India platform, based in Mumbai.
According to the company, Markel India will focus initially on providing treaty and facultative reinsurance to local Indian insurers, in a broad range of commercial classes including casualty, financial lines, as well as contingency, event, personal accident, trade credit, and marine and energy.
The business will be subject to approval from Lloyd’s and from the regulatory authorities in India.
Ms Mathur most recently was executive vice president at HDFC Ergo, the Indian/German joint venture general insurance company, with responsibility for the casualty and financial lines business. She was also responsible for the launch of a number of specialty insurance products and for the company’s entry into the trade credit class.
McLarens appoints global marine head
Global loss adjuster McLarens has promoted John Cupitt as head of its global marine division.
Based in Brisbane, Mr Cupitt will oversee the strategic growth of the global marine specialty team.