Oil Companies May be Under Insured as Prices Rise, Notes Marsh

February 20, 2008

In a bulletin released in advance of Marsh’s National Oil Companies Conference to be held next week, the broker warned that oil companies run the risk of being under insured as world oil prices reach record highs.

Andrew George, Managing Director at Marsh, explained: “An increase in activity in the oil sector means that any major loss will cost more than ever to replace. In recent years there have been many more projects commissioned such as offshore infrastructure including rigs and platforms, refineries and petrochemical plants, which may have been less viable with lower oil prices. This increase in demand, which has shown little sign of abatement in the Middle and Far East, directly impacts replacement values and project lead times.

“While many clients are actively addressing this issue many remain significantly underinsured. With triple-digit percentage increases in replacement value now common, oil companies need to address their strategy for managing risk, including their insurance limits, to ensure that a major incident does not become a needless financial burden.

“Additionally, as the demand for commodities has increased, lead times for replacements have also increased. Oil companies also need to ensure that their business interruption insurance policies and contingency plans reflect the latest market developments. Today, rebuild times for major plants that may have been 24 months, could be 36 to 48 months or more.”

The Marsh National Oil Companies Conference will be held on 26 and 27 February at the Madinat Jumeirah in Dubai. A full agenda and details on how to register for the conference can be found at: https://programs.regweb.com/marsh/2008NOC/

Source: Marsh – www.marsh.com

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