Oil Insurance Limited (OIL), the Bermuda-based mutual company, which currently insures 83 energy companies, was heavily impacted by 2004’s hurricanes, especially Ivan. The storm’s “slow track across the Gulf of Mexico proved to be the costliest hurricane ever for the Company,” according to President and CEO Jack L. Wesley.
OIL posted a net 2004 loss of $548 million, comprised primarily of a net underwriting loss of $777 million offset by net investment income of $238 million. General and administrative expenses totaled $9 million.
Wesley noted that 2004 was not a year that will be easily forgotten, as the sheer scale of industry losses in 2004 made it especially memorable. He told shareholders at the company’s annual general meeting on March 17, that in periods of worse than expected losses, OIL’s mission is to provide the solid and stable financial platform that shareholders depend upon for their property damage and pollution insurance coverage and to settle all claims equitably and expeditiously.
Wesley also welcomed the 3 energy companies who became new members of OIL during 2004 and commented on the diversity of the entire membership pool. During 2004 total gross assets insured reached a new record level of slightly in excess of $2.0 trillion, showing steady growth for the fourth successive year.
He stressed that, while OIL has witnessed an expanding membership base over the past several years, the Company has not compromised its fundamental principles of focusing on providing catastrophe insurance coverages specifically tailored to the Energy Industry. “Against a backdrop of an unusually catastrophic loss year, OIL’s ability to continually provide stable and quality products in the most cost-efficient manner to its members must be viewed as an extraordinary achievement by any measure. With a $250 million per occurrence limit and up to $1 billion for a single event loss involving multiple policyholders, OIL continues to offer the largest net limits of any major insurance company in the world,” Wesley stated.
Sr. VP and COO Douglas A. Kline also commented on the net underwriting results of OIL in 2004, reminding Shareholders that OIL exists for one purpose and one purpose only – to pay claims incurred by members during the course of their operations. “Given the nature of the business operations of the global energy industry, it is inevitable that loss activity can be very volatile on a year-to-year basis, but OIL’s unique Rating & Premium Plan and a disciplined Capital Management process combine to ensure that the Company will always maintain sufficient financial resources to pay members’ claims,” Kline stated.
He also noted that Net premiums earned in 2004 were $443 million, the highest in the history of the Company, while Shareholders Equity and Total Statutory Capital at December 31, 2004 were $994 million and $1,779 million respectively. He also reported that OIL continues to maintain a Standard & Poor’s financial strength rating of A+ (“Strong”) and a Moody’s rating of A1.
Wesley concluded the meeting by commenting, “OIL’s continuing success, as a mutual insurance company, is a direct result of the unique partnership and commitment among the Shareholders, the Company’s Board of Directors and the staff at Oil Management Services Ltd.”.
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