Insurance Blog

No single factor, rather a sequence of failures involving a number of different parties led to the Deepwater Horizon explosion and fire which killed 11 people and caused widespread pollution in the Gulf of Mexico earlier this year.
That’s the upshot of a report released by BP today based on a four-month internal investigation led by Mark Bly, BP’s head of safety and operations.
BP concludes that decisions made by “multiple companies and work teams” contributed to the spill which it says arose from “a complex and interlinked series of mechanical failures, human judgments, engineering design, operational implementation and team interfaces.”
Based on the findings of the report, BP says it is unlikely that the well design contributed to the incident. Check out BP’s report website for further info.
The Wall Street Journal notes that the BP report boils the investigation down to eight key findings, with BP accepting some responsibility for the disaster. […]

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The explosion of the Deepwater Horizon rig has had dramatic consequences in terms of loss of life and pollution, but is not a market changing event for offshore energy insurers, according to a new report by Marsh.
In its latest Energy Market Monitor, Marsh says the most recent market moving event was Hurricanes Katrina and Rita when rates in the Gulf of Mexico went from the ranges of 0.4 percent to 3.5 percent and limits dropped by 75 percent.
In contrast, while energy insurers have been unsettled by the Deepwater Horizon losses, capacity has not constricted and price increases are likely to be modest unless further major losses occur. Marsh explains:
The market is getting rises on offshore renewals but not large rises. There isn’t a lack of capacity and, as things stand, no one looks as though they are ‘leaving the party’. Until that happens, the offshore market will continue to drift […]

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The number of federal securities class action filings continued to decline in the first half of 2010 due in part to a decrease in credit crisis-related litigation, according to two just-released reports.
A report prepared by the Stanford Law School Securities Class Action Clearinghouse and Cornerstone Research found a total of 71 federal securities class actions were filed in the first half of 2010, a 15.5 percent decline from the 84 filings in each half of 2009.
Credit crisis-related litigation accounted for only eight filings in the first half of 2010, compared with 37 filings in the first half of 2009 and 16 filings in the second half of 2009.
Stanford law school professor Joseph Grundfest said:
The securities fraud litigation wave stimulated by the credit crisis now appears to be history. We have an inventory of cases waiting to be dismissed, settled, or tried, but to borrow a phrase from the current Gulf […]

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In our PowerPoint report on the Deepwater Horizon disaster we note that one of the many likely legal avenues to be pursued in post-spill litigation includes health claims by workers assisting in the cleanup.
Given the sheer scale of the cleanup, the use of chemical dispersants and the numbers of workers involved in the Deepwater Horizon response, the potential for some type of work-related injury or illness claim appears inevitable. At last count, BP said approximately 43,100 personnel were involved in the response effort.
Now the Wall Street Journal law blog reports on a lawsuit filed by a Louisiana fisherman against BP calling for a court-monitored health monitoring program for volunteers and workers who say they have been exposed to the oil, fumes and other chemicals while cleaning up the spill.
According to the WSJ law blog, the fisherman filing suit (who apparently was hospitalized in late May for illnesses caused by the […]

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Latest news that BP has finally managed to cap the well that has spilled millions of gallons of oil into the Gulf of Mexico comes as the latest Gallup poll says the spill is fading as an issue for the American public, as reported by the Washington Post’s The Fix blog.
Just 7 percent of respondents in the July Gallup poll mentioned “natural disaster response/relief” as the most important problem facing the country, a significant drop from 18 percent in June (in May just 1 percent said natural disaster relief was the top problem).
Frank Newport, editor-in-chief of the Gallup Poll observes:
Americans’ reduced likelihood to see the spill as the top problem could reflect the reality that the spill is no longer “new” news or perhaps that Americans are becoming more confident that the spill will be fixed.”

 The Fix blog puts its money on the former, observing that “the wall-to-wall coverage of […]

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Despite significant catastrophe losses during the first half of 2010, including the Chilean earthquake, reinsurance rates continued to decline at the July 1, 2010 reinsurance renewal, according to a newly released report from Guy Carpenter.
The report found that U.S. property rates decreased by as much as 15 percent, with pricing for the year down 12 percent. Meanwhile, across the energy and casualty sectors, conditions were flat or down, though the Deepwater Horizon rig disaster has the potential to put upward pressure on rates.
Predictions of an active hurricane season have had only a slight impact on June and July renewals, with quoting behavior firmer than expected, but if the forecasts are right, there is a greater chance the marketplace will look very different at the January 1, 2011 renewal, Guy Carpenter said.
It went on to explain that while the Deepwater Horizon loss is potentially a market-changing event, it is geared principally towards […]

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The Wall Street Journal reports on the Obama Administration’s plans to ask BP to establish a fund to compensate victims of the Deepwater Horizon oil spill.
The fund would be independently administered, in effect taking some of the decisions about compensation out of BP’s hands. The WSJ article notes:
White House officials on Sunday said they wanted BP to put “substantial” funds into an escrow account to cover claims by Gulf Coast businesses and residents affected by the spill.
President Barack Obama plans to bring up the idea at a White House meeting Wednesday with top BP executives, including Chairman Carl-Henric Svanberg.”

The WSJ goes on to quote a spokesman for BP saying that the company expects to discuss the proposal with President Obama on Wednesday.
The article also cites legal experts saying that while other government-run funds exist (e.g. Superfund legislation, asbestos liability funds, and the 9/11 victims compensation fund), they differ from the proposal […]

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The Wall Street Journal reports on the Obama Administration’s plans to ask BP to establish a fund to compensate victims of the Deepwater Horizon oil spill.
The fund would be independently administered, in effect taking some of the decisions about compensation out of BP’s hands. The WSJ article notes:
White House officials on Sunday said they wanted BP to put “substantial” funds into an escrow account to cover claims by Gulf Coast businesses and residents affected by the spill.
President Barack Obama plans to bring up the idea at a White House meeting Wednesday with top BP executives, including Chairman Carl-Henric Svanberg.”

The WSJ goes on to quote a spokesman for BP saying that the company expects to discuss the proposal with President Obama on Wednesday.
The article also cites legal experts saying that while other government-run funds exist (e.g. Superfund legislation, asbestos liability funds, and the 9/11 victims compensation fund), they differ from the proposal […]

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As the New York Times reports on the lack of consensus surrounding how much oil is spilling from the Deepwater Horizon well in the Gulf of Mexico, a timely new study from across the pond says that green energy systems are essential in securing our energy supply and protecting the environment.
According to the report from Lloyd’s 360 Risk Insight and UK think tank Chatham House, the Deepwater Horizon oil spill is an example of how reliance on fossil fuels is pushing the search for reserves into more difficult and risky territories as declining production from easy to access oil reserves combines with growing global energy demand.
However, Lloyd’s reports that these trends could spur the transition to more cost-efficient clean and renewable energy systems. A press release quotes Lloyd’s CEO Richard Ward saying:
The current generation of business leaders need to rethink their approach to energy risks or be left behind as […]

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