Recent accidents in the Gulf of Mexico, East Timor Sea and North Sea are, amongst others, regarded as catastrophic events by the insurance industry dueto loss of life and financial loss. Traditionally, upstream insurance reliesheavily on underwriting judgement for decision making. It is evident that theupstream offshore energy insurance industry lags behind other specialistinsurance areas in assessing pure engineering aspects of a risk. This presentsa problem in an area that requires wide engineering expertise to perform a riskassessment. Such expertise covers construction, well control, property damage, pollution, business interruption and any combination of these.
Further, the impact on insurance companies has been almost overlooked by theExploration and Production (E&P) industry as they concentrate on fulfillingtheir owners and regulatory requirements. Catastrophic events are considered, even within the E&P industry, as being " unfortunate". However, for theinsurance companies and E&P companies they can be disastrous.
These events have highlighted the importance of detailed engineering riskassessment on each area of engineering including: structures, process, controlof well and construction. Within these areas, risk factors including;management and process systems, competency of personnel, technical and designdetails will be reviewed in detail together with pricing implications to theinsurance industry.
Insurance costs for E&P companies can form a substantial part of theirannual expenditure, especially for new projects and new companies. Effectiverisk assessment, together with correct pricing, could be of benefit to allstakeholders.
This paper discusses the factors relating to the risk assessment of upstreaminsurance projects and suggests ways of improving risk to both insurancecompanies and E&P operators by identifying best practice in each area ofengineering. This will assist E&P companies adapting or modifying theirexisting operational systems and enable them to enhance their own riskmanagement process by benchmarking against similar operators.
