Insurance Coverage Issues From The Gulf Oil Spill

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Understading the impact of the Gulf Oil Spill on the Insurance Industry

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Insurance Coverage Issues From The Gulf Oil Spill

  1. 1. The Alphabet of Insurance Coverage in Oil Spill Losses Daniel W. Gerber Kurt Falk Linda D. Kornfeld James R. Pierce, Jr.
  2. 2. How will the Insurance Industry React? <ul><li>Impact on the upstream Insurance Market </li></ul><ul><li>Impact on the Excess Liability Market </li></ul><ul><li>Catastrophe Coverage wake-up call </li></ul>
  3. 3. The Effect of Caps and Legislation <ul><li>OPA '90 Coverage - an illusion? </li></ul><ul><li>Can the industry absorb a larger liability cap? </li></ul>
  4. 4. Insured catastrophe losses 1970–2009 USD bn, at 2009 prices Source: Swiss Re, sigma No 1/2010, Figure 3 2005: Hurricanes Katrina, Rita, Wilma 2008: Hurricanes Ike, Gustav 2001: Attack on WTC 1999: Winter storm Lothar 1992: Hurricane Andrew 1994: Northridge EQ 2004: Hurricanes Ivan, Charley, Frances  increased insurance penetration  more values  more values in high - risk areas  higher vulnerability  climate change (storm,flood) Ocean Drive, FL, 2000 Ocean Drive, FL, 1926
  5. 7. Underwriting consequences <ul><li>Will risk assessment and due diligence from insurers on exploration and production activities (not only offshore) increase further? </li></ul><ul><li>Will the industry be looking towards broader conditions and larger coverage limits? </li></ul>
  6. 8. Claims assessing and handling <ul><li>What coverages are triggered? </li></ul><ul><li>What types of claims are likely? </li></ul><ul><li>Claimants will want to and need to receive support quickly and non-bureaucratically. </li></ul><ul><li>Will the analysis of coverages, extensions of coverages and exclusions be reviewed and defined rigorously going forward? </li></ul><ul><li>What about fraud? </li></ul><ul><li>How well will nature be able to cope with the oil spill, do we understand the abilities nature has? </li></ul>
  7. 9. Coverage Maze <ul><li>Pollution exclusion </li></ul><ul><ul><li>Is crude oil (or a dispersant) a pollutant? </li></ul></ul><ul><li>Economic loss issues </li></ul><ul><li>Coverage for nuisance claims </li></ul><ul><li>Time Element Coverages </li></ul>
  8. 10. Time Element Coverages <ul><li>Business Interruption (Business Income) </li></ul><ul><li>Contingent Business Interruption </li></ul><ul><li>Order of Civil Authority </li></ul><ul><li>Ingress/Egress </li></ul><ul><li>Extra Expense </li></ul>
  9. 11. Insurance Industry Reactions <ul><li>Technical viability for future business will be taken. </li></ul><ul><li>What other means does the industry have to help in insuring against possible future loss? </li></ul><ul><li>Will the insurance industry will assess changes for its own benefit? </li></ul><ul><li>Will contract certainty be an issue? </li></ul>
  10. 12. Where will the future take us?
  11. 13. Questions?
  12. 14. The Alphabet of Insurance Coverage in Oil Spill Losses Daniel W. Gerber, Kurt Falk, Linda D. Kornfeld, James R. Pierce, Jr.

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