Energy Review 11-2017
28 November 2017
With the end of the year just around the corner, one could have wondered if 2017 is going to pass by unnoticed. In the commercial and industrial world, few people like surprises unless they are pleasant, such as a major oil discovery – and that actually happened when Pemex made its biggest onshore oil find in 15 years. Overall, however, there have not been too many surprises; it has been more like “what we don’t want to happen just goes on happening”.
There has been one major development which has not yet run its course: the arrival of Crown Prince Mohammed bin Salman in Saudi Arabia. In a very short period of time he has arrested hundreds of extremely wealthy royal family members, announced plans for westernising society – for example, giving women the right to drive cars – and more. Such is the speed and extent of his actions, there is talk of how long the King will stay in charge. More worrying is the possible effect in Iran as what they see as a young, impetuous firebrand taking over in their neighbouring country. Just as Iran and Iraq appear to be smoothing relations, we do not want Iran and Saudi Arabia upsetting the balance in the Middle East any more than they have up until now.
We are very pleased indeed that the nightmare of the ISIS caliphate appears to be coming to an end and hope that the resultant vacuum will not give a new group of extremists the chance to slip in. Obviously, Iraq is one of the big winners and we read stories about “Iraq increases oil export capacity” and “three-year strategic plan for Basra oil and gas”.
Just as the oil industry has adjusted itself to the price of a barrel of oil hovering around US$50, the price starts going up, causing corporations to re-think their investment plans: not an unpleasant surprise but it diverts their attention from business as usual. Some of the headlines highlight a lot of planning: Argentina’s YPF to invest US$21.5 billion from 2018 to 2022, Algeria invests US$2 billion into the Hassi R’Mel gas field, Exxon is spending US$1 billion a year to research green energy, Norwegian firms sign US$3 billion deal with Iran for solar panels, Secretary Zinke announces largest oil and gas lease sale in US history. There is a lot of money out there and money talks. Look at Alaska: “Arctic refuge drilling closer as Senate moves to open site”, “Oil Search to buy assets in Alaska’s North Slope”, “Alaska signs gas pipeline project deal with China”. Environmentalists are getting a battering.
At the end of year conferences and gatherings there has been talk of hardening markets – in most cases, it has been wishful thinking on behalf of major carriers and reinsurers. It is hard to see broking houses agreeing with this: they have been too busy with mergers and acquisitions. There has been an increase in cyber insurance products and drone technology is becoming a more specialist insurance market as UAV inspections are now taking on in the oil and gas industry.
Moves, promotions and new career paths continue apace with expertise and knowledge at a premium as the major players seek ways to keep ahead of the pack. Within Price Forbes we have appointed Poul Hansen as Head of Renewable Energy to lead the expansion of our renewable energy offering. We hope this and our other energy specialists will encourage our clients to call in for a discussion on how we can continue to support you all.
Blast causes fire in oil pipeline in Bahrain
An explosion caused a fire in an oil pipeline in Bahrain on the 9th November but there were no casualties and emergency services brought it under control, the Interior Ministry said in a statement on Twitter.
The fire was near Buri village which lies about 15 kilometres (ten miles) from the capital Manama. The ministry did not say what caused the blaze but a Reuters witness said there was a large fire and it had burst the pipeline.
It was not immediately clear what impact the fire had on oil flow.
Bahrain relies on the Abu Safa oilfield for the majority of its oil. It shares the field with Saudi Arabia.
Second explosion in one year on ACES FPSO in Pakistan
A fire broke out aboard the partially scrapped ACES FPSO at a shipbreaking plot in Gadani Pakistan.
This is according to the Shipbreaking Platform NGO, which said on the 9th November that luckily no workers got caught in the flames of the fire which broke out aboard the ACES on the 8th November.
However, the Shipbreaking Platform pointed out that this is the second major accident at the shipbreaking spot involving the same vessel in just over a year.
Investigation under way into fire at Enchilada platform in the GoM
Shell, the Bureau of Safety and Environmental Enforcement (BSEE), and the US Coast Guard (USCG) are investigating the cause of a fire which occurred on the 8th November at the Enchilada platform in the US Gulf of Mexico.
All 46 personnel working at the Enchilada facility were safely evacuated. Two Shell employees were injured. Both have been treated and released from the hospital.
The BSEE reported that a 54-year-old male suffered from flash burns and a concussion, and a 29-year-old male suffered from a sprained wrist and a concussion.
The operational incident involved a fire associated with a 30-inch gas export pipeline. Production at the Auger and Salsa platforms and nearby fields were shut in.
Located in the Garden Banks block 128, the Enchilada platform is about 112 nautical miles south of Vermilion Bay, Louisiana.
Shell said that there was no visual evidence of oil on the water near the incident site. The source of the fire was isolated. For safety reasons, the company said that it had chosen to allow the gas discharge (three to six feet flames) to burn while the pipeline was safely depressurised.
The USCG and Shell-contracted vessels were on site monitoring the situation. As a precautionary measure, a Clean Gulf Association oil spill response vessel was mobilised, and other vessels were on standby.
Shell personnel performed a visual assessment of the Enchilada platform and based on those observations, the asset appears to be structurally sound. A more detailed analysis of the platform will be conducted, the company said.
Brazil: Worker injured on P-37 FPSO
A worker has been injured aboard the P-37 floating production storage and offloading (FPSO) vessel operated by Brazilian oil giant Petrobras.
Brazilian oil workers’ union Sindicato dos Petroleiros (Sindipetro) do Norte Fluminense said on Sunday 3rd November that the accident on the P-37 occurred on Saturday 4th November.
The incident involved an ELFE boiler that was shipped on the P-37 and, according to Sindipetro, could have resulted in a loss of life.
According to the union, the incident happened during the execution of a screw removal for flange removal and valve replacement, when the worker was injured during a pressure discharge which had not been indicated by the designated instruments.
The P-37 floating production storage and offloading unit is located in the Marlim field in the Campos Basin.
The Marlim field was the location of several accidents this year. Three workers died in a boiler explosion in June aboard the Norbe VIII drillship which was at the Marlim field at the time. In March this year, a helicopter had a rough landing and crashed into the heliport of the Petrobras-operated P-37 FPSO. Also, there was a collision between a support vessel and the Petrobras-operated P-35 FPSO, as well as an incident with a riser of the P-19 which was dropped and caused a leak of oil into the sea.
One worker dies in fire at Russia’s Yaroslavl oil refinery
One worker has died and another was injured when a crude oil distillation unit at an oil refinery in the Russian city of Yaroslavl caught fire on the 1st November, the refinery said.
The refinery, YANOS, is owned by Slavneft, which is controlled equally by Rosneft and Gazprom Neft.
The CDU-3 unit was halted and the fire was put out, while production at the plant continued, the plant’s press service said.
Russian oil pipeline monopoly Transneft said the plant has not asked for changes to oil products supplies or crude oil intake.
Derrick barge sinks in GoM
Derrick barge DB-1 has partially sunk in the Gulf of Mexico after adverse weather caused it to strike an underwater platform jacket on which it was working.
Louisiana-based TOPS, which owns the barge, said that on the morning of the 22nd October storms developed, hitting several vessels and platforms in the Gulf of Mexico. The 615-ton DB-1 is an eight-point mooring system derrick barge which can work in up to 600 feet of water and can accommodate up to 110 people.
TOPS LLC DB-1 evacuated 71 personnel to an assisting OSV after the DB-1 was pushed off its location by wind gusts measured at up to 67mph and waves of up to 12 feet. DB-1 had moved away from the underwater platform jacket sections, because of a previous rain squall, but it was punctured, possibly in a number of compartments, and began taking on water.
Evacuation to the OSV was via an installed walkway. No-one was injured and no-one had to go overboard. The DB-1 sunk several hours later, in 56 feet of water. According to the owner there was no pollution.
Fire at Tehran oil refinery kills six
A fire at an Iranian oil refinery in Tehran’s Shahr-e Rey district killed six workers and injured two others on the 27th October but firefighters brought it under control, state TV reported.
Since sanctions were lifted last year under a 2015 multinational nuclear deal, Iran has signed contracts with foreign firms to repair and modernise its oil refineries.
“The unit which caught fire was under construction. Six workers were killed and two were injured. The fire is under control now and other units in the refinery were not affected,” Governor of Rey district Hedayatollah Jamalipour said.
“Unfortunately technical problems caused leakage of oil that led to explosion and fire.”
Iranian media earlier reported that three workers were injured.
Tehran’s emergency services head, Pir Hossein Kolivand, told state television that both of the injured workers were in a critical condition, with 90 percent burns.
Statoil shuts parts of Mongstad refinery after leakage spotted
Statoil has informed that a naphtha leakage was reported at 07:14 a.m. on Tuesday 24th October at Mongstad refinery.
Employees who were not part of the emergency organisation at the plant were evacuated, and parts of the plant were shut down, Statoil said. The Statoil emergency response organisation was mobilised and handled the situation on an ongoing basis, the company added.
“We have notified the police, ambulance and fire departments according to our procedures, and continue notifying other public authorities,” Statoil said.
The refinery is the larger of the two refineries in Norway, with a capacity of almost 12 million tonnes of crude oil per year.
Oil for the Mongstad terminal comes in mainly through two pipelines from Troll B and Troll C and connected oil fields, and underground storage caverns can store up to 9.44 million barrels.
The oil from the giant Johan Sverdrup field will be brought ashore at Mongstad when production starts towards the end of 2019.
In an update on the 24th October at 09:58 a.m. CET, Statoil said that the situation “was brought quickly under control” when a naphtha leakage was detected at the Mongstad plant. All the 108 people at the plant have been accounted for and no injuries have been reported.
At 09:02 a.m. on the morning of Tuesday 24th October it was reported that the leakage at the plant had stopped and the signal indicating that the danger is over was sounded. The cause of the incident is being investigated.
Oil spill clean-up underway at Chaguaramas
An oil spill has been reported in the Chaguaramas area (the north-west peninsula of Trinidad, west of Port of Spain).
The Environmental Management Authority (EMA) said it was advised on the 22nd October of reports of an oily substance in the waters between Carrera Island and the Chaguaramas Peninsula.
It said on receipt of the information, the EMA, in accordance with its coordinating role, immediately notified the Office of Disaster Preparedness and Management (ODPM), the Institute of Marine Affairs (IMA), the Ministry of Energy and Energy Industries (MEEI) and the Maritime Services Division (MSD).
The EMA said a team was on site investigating this incident with the assistance of the Air Guard of the Trinidad and Tobago Defence Force (for aerial surveillance) and a vessel provided by the IMA.
It said the team reported the presence of an oily substance between Alcoa and Five Islands, with the substance concentrated within Williams Bay and along the Boardwalk.
The EMA said some streaks of oily sheen were observed near Harts Cut and near Five Islands. However, it added that no oily substance was observed further west of Five Islands.
The Authority says the team is continuing its investigation to identify the potential source of the oily substance.
Oil barge explosion off Texas kills one, fire now out
At least one person was killed and another was missing on the 20th October after an oil barge being pulled by a tug boat caught fire and exploded in the Gulf of Mexico off Texas, officials said.
The barge was carrying some 133,000 barrels of crude oil to a refinery in Corpus Christi when the explosion occurred at 04:30 a.m., they said.
The fire was allowed to burn itself out before being extinguished, said Rick Adams, Emergency Management Coordinator for the City of Port Aransas.
Six of the eight crew members were rescued and did not suffer any serious injuries, Mr Adams added.
“There are initial reports of some oil in the water,” the Coast Guard said in a statement, adding a safety zone had established around the area.
Bouchard Transportation owns the barge and the tug boat.
Fire at huge Chevron oil refinery in Los Angeles area
A fire broke out at a huge Chevron oil refinery in the Los Angeles area.
Police say the fire erupted late on the 17th October at the Chevron El Segundo Refinery. The company’s website says the 1,000-acre refinery is the largest on the West Coast.
The fire sent smoke into surrounding residential neighbourhoods, and police advised that people close their windows.
Dramatic flames could be seen soon after the blaze broke out, but firefighters smothered it with foam, and within about a half-hour there was little visible flame. No injuries have been reported.
Fires at such refineries have had implications for gas prices, although it was not yet clear if this one would.
Chevron was fined nearly US$1 million by the state of California for a major fire in 2012 at a refinery in the San Francisco Bay Area.
Gulf of Mexico oil spill triggers BSEE panel investigation
BSEE (Bureau of Safety and Environmental Enforcement) Gulf of Mexico Region Director Lars Herbst initiated a Panel Investigation on the 16th October into an oil release from subsea infrastructure located about 40 miles south-east of Venice, LA, in water 4,463 feet deep.
The flowline release, which began on the morning of the 11th October in an area identified as Mississippi Canyon 209, was reported by offshore oil and gas operator LLOG Exploration Offshore, LLC.
“BSEE places great emphasis on making certain all oil and gas operations on America’s Outer Continental Shelf are safe,” Mr Herbst said. “This panel investigation is a critical step in ensuring BSEE determines the cause, or causes, of the incident and develops recommendations to prevent similar events from occurring in the future.”
The five-member panel is made up of inspectors, engineers and accident investigators. At the conclusion of their investigation, the panel will issue a report that will contain findings, make recommendations and identify any potential violations for consideration by BSEE enforcement staff.
LLOG reported to the BSEE that they isolated the pipeline leak and stopped the leak on the morning of Thursday 12th October and estimated the unaccounted for oil volume to be in the range of 7,950 to 9,350 bbl.
BSEE inspectors travelled to LLOG’s Delta House platform on the 13th October to begin an initial inspection and investigation, and the BSEE panel will continue coordinating with LLOG and the US Coast Guard to complete the investigation.
Gas leaking from Kansas wells amid dispute over who must fix
Natural gas is leaking through unplugged abandoned wells which have penetrated a massive underground storage field in Kansas, creating a public safety hazard amid a dispute over who is responsible for fixing the problem, regulatory filings show.
Northern Natural Gas Company, which owns the underground storage facility, wants the Kansas Corporation Commission, which regulates oil and gas drilling in the state, to force well owners to plug abandoned wells. But the commission said in a filing last month that Northern Natural is responsible for making sure its natural gas is not escaping from the wells – and it asked the Federal Energy Regulatory Commission to order the company to take “remedial action”.
Officials are aware of the dangers of not fixing the problem. A series of explosions in 2001 in Hutchinson involving leaking natural gas from another company’s underground storage field killed two people and damaged the city. In that case, natural gas migrated from the Yaggy Storage Field, northwest of Hutchinson, and shot up through unplugged salt brine wells.
The dispute involves the Cunningham Storage Field, a depleted natural gas reservoir which was converted into a storage area for natural gas supplies. The wells in question are in an area which Northern Natural acquired through condemnation proceedings in 2010 after it discovered its gas had migrated, something which is not unusual for such storage fields.
The wells were capturing some of Northern’s stored gas, and as a part of the compensation drillers were also awarded US$3,000 per well to either plug their wells or seal them off from Northern’s supplies. No money has been paid out yet because the case was appealed.
The fact that wells were not plugged became an issue in April, when a farmer spreading fertiliser on his field struck the surface pipe of one well, unleashing an outburst of gas and liquids. The farmer turned off his vehicle, the gas did not ignite and no-one was hurt. But the well owner refused to take responsibility for extinguishing the blowout, according to the Kansas Corporation Commission. Northern also said it had no obligation to act.
The commission called in experts to extinguish the blowout and plug the well, costing Kansas US$166,030, the agency said. The commission inspected other abandoned wells in the storage field, and found two which have been leaking gas for at least three months.
Northern contends in its filing that five unplugged wells above its field are a safety risk. The company did not learn of the two leaking wells until the commission filed its motion, and the agency has still not told the company which wells are leaking, Northern spokesman Michael Loeffler said.
“We don’t want our facilities to be unsafe. We have spent hundreds of millions of dollars in integrity issues over the years to ensure the safety of our pipeline. And then you have someone like the KCC who is charged with the responsibility of keeping us safe and they really are complicit with allowing this situation to continue,” Mr Loeffler said.
Louisiana rig explosion leaves seven injured
An oil rig exploded in Louisiana’s Lake Pontchartrain late on the 15th October and at least seven people were injured, authorities told local media.
Kenner Police Department spokesman Sergeant Brian McGregor told the Times-Picayune newspaper that there were “a lot of injuries”, with at least seven confirmed and more expected.
St Charles Parish said on its Facebook page that an oil rig was on fire in the lake near New Orleans and had “caused the loud sound earlier tonight.”
A WVUE Fox 8 television video posted on Facebook showed an industrial structure ablaze with smoke pouring off it as lights flashed nearby.
There were no immediate details on the cause of the fire or the ownership of the rig.
China unveils rules allowing foreign firms to take majority stakes in local insurers
China took a major step towards the long-awaited opening of its financial system, saying it will remove foreign ownership limits on banks and asset-management companies while allowing overseas firms to take majority stakes in local securities ventures and insurers.
The new rules, unveiled at a government briefing on the 3rd November, will give global financial companies unprecedented access to the world’s second-largest economy. The announcement coincided with Donald Trump’s visit to Beijing and bolsters the reform credentials of Chinese President Xi Jinping less than a month after he cemented his status as the nation’s most powerful leader in decades.
While China has already made big strides in opening its equity and bond markets to foreign investors, international banks and securities firms have long been frustrated by ownership caps which made them marginal players in one of the fastest-expanding financial systems on Earth.
Those who enter China will face plenty of risks, including competition from state-owned players and the threat of rising defaults, but optimists say the opening will create new opportunities for foreign firms and make the domestic financial system more efficient.
“It’s a key message that China continues to open up and make its financial markets more international and market-oriented,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “How important a role foreign financial firms can play remains to be seen.”
Regulators are drafting detailed rules, which will be released soon, Vice Finance Minister Zhu Guangyao said at the briefing in Beijing.
Here’s what we know so far:
Foreign firms will be allowed to own stakes of up to 51 percent in securities ventures; China will scrap foreign ownership limits for securities companies three years after the new rules are effective; the country will lift the foreign ownership cap to 51 percent for life insurance companies after three years and remove the limit after five years. Limits on ownership of fund management companies will be raised to 51 percent, then completely removed in three years.
Chinese markets took the news in their stride, with the nation’s benchmark Shanghai Composite Index trading little changed after the announcement. Shares of Chinese financial companies were mixed in Hong Kong.
Foreign financial companies applauded the move, with JPMorgan Chase & Company and Morgan Stanley saying in statements that they’re committed to China. UBS Group AG said it will continue to push for an increased stake in its Chinese joint venture.
Policy makers had hinted at an opening in recent months. China’s Foreign Ministry had recently said entry barriers to sectors such as banking, insurance, securities and funds would be “substantially” eased “in accordance to China’s own timetable and road map.”
People’s Bank of China Governor Zhou Xiaochuan, who has spent much of this year amplifying calls for financial reform, advocated greater competition in the financial sector in June.
The announcement’s timing, on the day Mr Trump ended his first visit to China as US president, may help him claim some credit for the opening and for warmer ties between the two world powers, but the decision was almost certainly the result of long behind-the-scenes planning by Chinese authorities, according to Iris Pang, a China economist at ING Groep NV in Hong Kong.
New back office deal to save London market £100 million
A new five-year contract which will see bureau services for the London market continue to be outsourced to DXC Technology has been heralded by the London market for its future cost savings.
The Lloyd’s Market Association (LMA) and the International Underwriting Association (IUA) announced on the 31st October that they have concluded a transaction with DXC Technology for the continuing provision of back office services for the London subscription market.
Under the new terms, DXC will optimise their service delivery, enabling cost reductions to the market in exchange for a fixed five-year deal, delivering savings that were not possible under the previous one-year rolling contract.
LMA CEO David Gittings said, “It is heartening to see the LMA and IUA leading a cross market initiative to deliver a material cost reduction, at a time when the market’s cost base is under constant pressure. I’d like to thank DXC for making the commitment to our market and delivering valued services whilst also committing to guaranteeing the ongoing quality of that service.”
Dave Matcham, CEO of the IUA added, “This agreement will help our members process business more efficiently and is an important part of London’s drive to modernise its systems and provide a better service for clients.”
Piracy numbers continue to fall in 2017
Despite the number of maritime piracy attacks continuing to decline, the International Maritime Bureau (IMB) has urged vigilance and greater collaboration from agencies and shipping companies to tackle the continued threat in a number of hotspots.
The IMB issued its quarterly report on piracy on the 17th October which showed a total of 121 incidents of piracy and armed robbery against ships were reported in the first nine months of 2017. In total, 92 vessels were boarded, 13 were fired upon, there were 11 attempted attacks and five vessels were hijacked in the first nine months of 2017.
In contrast, there were 141 incidents for the first nine months of 2016 and 190 for the same period in 2015. The highest overall year for piracy incidents was 2013.
While piracy rates were down compared with the same period in 2016, there is continuing concern over attacks in the Gulf of Guinea and in South East Asia. The IMB also said there was an increase in attacks off the coast of Venezuela and other security incidents against vessels off Libya – including an attempted boarding in the last quarter – which highlighted the need for continued vigilance.
No incidents were reported off the coast of Somalia in the third quarter 2017, although the report cautions that pirates in the area retain the capacity to target merchant shipping at distances from the coastline.
Pottengal Mukundan, Director of the IMB said, “In general, all waters in and off Nigeria remain risky, despite intervention in some cases by the Nigerian Navy. We advise vessels to be vigilant. The number of attacks in the Gulf of Guinea could be even higher than our figures as many incidents continue to be unreported.”
The IMB said the key remained for ship-owners and their insurers to report incidents so a full global picture can be built to ensure that anti-piracy resources are effectively targeted.
“One of the strongest weapons triggering the fight against piracy is accurate statistics,” said Mr Mukundan. “There should be free and reciprocal sharing of information between the IMB PRC and regional information centres. With a clearer picture of when and where violent incidents are taking place, authorities are able to better allocate their resources to tackle this global issue.”
Statoil opens new Valemon control room
Statoil made history on Thursday 9th November, or at least made an important step towards making history, with the opening of the Valemon control room at Sandsli in Bergen.
Namely, the Valemon platform, located in the North Sea offshore Norway, will be the first platform in Norway to be remotely-controlled from land.
“This is a vital milestone for Statoil. We have had land-based surveillance and control of offshore operations for a long time, however, the remote control of Valemon marks one important step forward on our digitalization journey,” says Gunnar Nakken, head of the operations west cluster in Statoil.
Control room operator Joakim Tesdal is in conversation with Norwegian Minister of Petroleum and Energy, Terje Søviknes. Tesdal is one of 14 operators who, divided on seven shifts, will man Valemon’s onshore control room.
Valemon is designed and constructed for such remote control. Statoil has currently no other platforms of this kind, but this solution will undoubtedly be considered for other small and medium-sized platforms in the future, and remote control will be a central building block, the company said.
“Most of our production will still be carried out on large, manned platforms, such as Aasta Hansteen and the Johan Sverdrup platform, but for somewhat smaller platforms and fields it will absolutely be considered. First, we must gain experience from Valemon,” says Nakken.
The Valemon field came on stream in 2015, 30 years after the field was discovered in 1985.
Maersk and partners to implement blockchain-based marine insurance platform
Ship operator Maersk, in conjunction with consultancy EY, data security firm Guardtime and Microsoft, is to build a blockchain-based marine insurance platform to be rolled out from the beginning of next year. The collaborators called it the first real-world use of the nascent technology in the shipping industry.
In a web alert, Standard Club said that the new platform could represent a watershed moment within the marine insurance industry, and the insurance industry as a whole.
The platform will permit the digitisation of transactions among the global network of ship-owners, insurers, reinsurers, brokers, and third parties, allowing for real-time exchange of original supply chain events and documents through a digital infrastructure.
As such, the parties will have access to distributed common ledgers which will capture data about identities, risk and exposures, and integrate this information into the insurance contracts.
Standard Club noted that the technology would then have the capability of creating and maintaining asset data from multiple parties, linking data to policy contracts, receiving and acting upon information which results in a pricing process change; connecting client assets, transactions and payments and capturing and validating updated first notification or loss data.
Standard Club said that “ultimately, blockchain technology has the potential to have a major impact on the marine insurance sector, and it will be interesting to see how the industry will respond”.
The Club said that it was continuing to look at ways it could utilise new technologies to ensure it meets the needs of its members. It said that as part of this strategy it would shortly be launching an interactive member/broker portal, more information on which would follow in due course.
Demand for BI & supply chain cyber coverage surging
Demand for holistic cyber cover addressing business interruption and supply chain risks has increased significantly, Beazley and Munich Re have reported through their Vector partnership.
The duo forged the partnership back in 2015 to offer bespoke expertise and deep capacity for the world’s largest and most complex cyber risks, allowing some of the world’s largest companies to obtain cover of up to US$100 million (€100 million) for a wide range of first party and third party cyber exposures.
“Since we established Vector, we’ve seen a significant shift in the pattern of demand for cyber cover,” said Paul Bantick, technology, media and business services UK focus group leader at Beazley. “Every company insured through Vector has sought considerably broader coverage, in particular for business interruption and contingent business interruption cover.
“While these businesses have traditional property and cyber liability policies in place, they have recognised that they do not have complete protection for cyber-related events and this is clearly an issue the boardroom wants to address.”
The carriers said that recent high profile cyber-attacks such as WannaCry and NotPetya have highlighted clients’ vulnerabilities. While cyber policies back in 2015 only addressed third party liabilities arising from data breaches and were more relevant to firms holding large amounts of personally identifiable customer data such as banks, many other industries such as large manufacturers, industrial companies and critical infrastructure are now very worried about the loss of production capability, whether caused by an attack on the company’s own system or on a critical supplier.
Beazley and Munich Re noted that the loss of customers’ personal data is still a concern, and that concern is increasing with the European Union’s General Data Protection Regulation (GDPR) coming in to force next year.
Chris Storer, head of cyber solutions for Munich Re’s Corporate Insurance Partner, said, “Vector has been highly successful in areas where our shared and complementary expertise can help clients prepare for rapidly evolving cyber risks. The coming together of our specialised experts makes Vector a powerful proposition for companies looking beyond their traditional coverages.”
Neon launches marine joint venture in Italy
Specialist Lloyd’s insurer Neon has launched an underwriting operation in partnership with Italian marine broker, Cambiaso Risso, who will have a minority shareholding in the joint venture.
Based in Genoa, Neon Italy will offer risk capacity to clients, initially targeting hull and cargo business placed locally.
Neon Italy will be led by Sergio Revello, who has extensive experience in the international marine sector across both broking and underwriting roles, including on behalf of Lloyd’s syndicates, according to the press release. The board of directors includes Neon’s group CEO, Martin Reith, and Mauro Iguera, CEO of Cambiaso Risso.
Intending to start writing business from January 2018, Neon Italy will, subject to approval, be regulated by IVASS and become a Lloyd’s approved coverholder writing on behalf of Neon’s Syndicate 2468.
The venture will develop Neon’s marine portfolio with Cambiaso Risso’s global network of relationships and specialist technical expertise developed over its 70-year history, the statement said.
London company market wrote £22.725 billion in 2016
The London (re)insurance market reached a record size in 2016 after the International Underwriting Association (IUA) revealed on the 20th October that its members increased their business written in 2016 by 2.9 percent to £22.725 billion.
The IUA represents the (re)insurers that write London Market business in the so-called company market, in contrast to those that write through the Lloyd’s platform.
Earlier this year, Lloyd’s revealed that its gross written premium (GWP) had mushroomed to a record size last year, up from £26.69 billion to £29.87 billion. The trend has continued with the 2017 half-year stage up from £16.3 billion to £18.89 billion.
According to the IUA, gross premium written in London by its members totalled £16.034 billion, while a further £6.691 billion was identified as written in other locations, but overseen and managed by London operations, taking the total to £22.725 billion.
The IUA report for the first time also analyses income earned by branch operations in the London Market likely to be directly impacted by Brexit. A total of £7.383 billion is currently underwritten via such business models which face a change in their regulatory status as the UK leaves the European Union.
In addition, the report calculates that £1.554 billion of income from Europe is earned by London Market companies which are either UK-headquartered or subsidiaries of parent companies in a third country outside Europe.
IUA CEO Dave Matcham said, “One of the most important outstanding Brexit questions for the London company market concerns the status of operations currently conducting business in the city as branches of either a continental European parent company or of a European subsidiary and with a parent elsewhere.
“These are popular business models and, without any transitional arrangements or a new trading agreement, their status must change. The Prudential Regulation Authority will need to supervise them either as subsidiaries or as third country branches. Any adjustment to a new framework will, of course, occupy time and resources and the process for change should, therefore, be laid out as soon as possible in order to provide a degree of stability and certainty.
“At the same time there is a significant amount of European premium currently underwritten by subsidiaries and UK domiciled firms under the EU’s financial services passport regime. Our survey clearly demonstrates the interconnected and mutually supportive nature of insurance business across the UK and other EU member states.”
Elsewhere in the IUA’s report, restated figures for 2015 show an overall premium total of £22.068 billion, indicating that over the past year the company market has seen a rise in income of £0.657 billion, or 2.9 percent. This increase is driven by a growth in business controlled by London operations, but written elsewhere, although a significant part is due to better data collection, capturing some premium which was not identified in previous surveys. Exchange rate fluctuations have also been highlighted by a number of companies as a major factor in increasing premium volumes reported in pounds sterling for 2016.
A breakdown of income by class of business reveals that premium categorised as ‘other’ rather than in any of the main classifications rose from £1.045 billion to £1.416 billion over the past 12 months and has almost doubled since 2013. This suggests firms may increasingly be looking to grow their operations by participating in non-traditional lines of business, focussing on specialist classes and possibly developing more innovative new products.
In addition to Lloyd’s and the company market, London’s P&I insurers are estimated to write around £1.7 billion in annual GWP.
People in the News
Price Forbes hires Hansen to expand renewable energy offering
We are very happy to confirm the appointment of Poul Hansen as Head of Renewable Energy to lead the expansion of our renewable energy offering.
Mr Hansen joins from JLT Specialty, where he was most recently senior partner and head of renewable energy. Prior to that he spent 13 years as a broker at Danish intermediary Optica, specialising in renewable energy business.
Price Forbes provides a full range of insurance advisory and placement services, specialising in a large range of areas including on and offshore wind, all classes of solar, hydro, geothermal, storage, biomass, bioenergy, W2E and wave & tidal.
For more information about Price Forbes’ renewable energy capacities please contact Poul Hansen.
Liberty appoints senior war & terrorism underwriter
Liberty Specialty Markets (LSM) has appointed Jennie Beard to the new role of Senior Underwriter, War & Terrorism.
Based in LSM’s London headquarters, Ms Beard will report to Paul Beattie, Underwriting Manager, War & Terrorism.
Ms Beard joins from Sompo Canopius, where she was co-head of its London-based terrorism team, writing a diverse global account including major corporate clients.
Standard Syndicate 1884 hires reinsurance head from Lloyd’s
Charles Taylor-managed Standard Syndicate 1884 has appointed Ian Smith to the role of Hull Class Underwriter, and Courtney Naylor as Head of Reinsurance.
Mr Naylor joins from Lloyd’s where he worked in their outwards reinsurance team, providing oversight of syndicates, including 1884.
Mr Smith has nearly 30 years of experience in the marine market in London, gained across both the Lloyd’s and company markets. He was recently at Navigators Syndicate in the role of head of hull & war.
Syndicate 1884 provides a range of marine, selective non-marine property and cyber insurance covers to the marine and marine energy industry sectors.
AmTrust at Lloyd’s adds cyber innovation underwriter
AmTrust at Lloyd’s (ATL) has appointed Rachel Carter as Cyber Innovation Underwriter, based in London.
Ms Carter will work with the cyber underwriting team on the development of new cyber offerings and the enhancement of existing products. She will also focus on product wording and educational initiatives, helping the business and their partners with an understanding of cyber threats.
Before joining AmTrust, Ms Carter ran a consulting business focusing on terrorism and cyber insurance innovation.
She also co-founded and currently manages the Journal of Terrorism and Cyber Insurance.
Ms Carter will report to Matt Northedge, Head of Cyber, AmTrust at Lloyd’s, working with underwriters Laura Pennick and Adam Holdgate, both of whom joined the AmTrust at Lloyd’s team in the last year.