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Insurers Raise Oil Rig Prices 50% After BP Spill

Posted on 03 Jun 2010

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Moody's Investors Service said that insurers are charging 50% more for policies covering oil rigs in deep water after an explosion on a BP-leased platform in the Gulf of Mexico triggered the worst spill in US history.

The ratings company said today that the price to insure rigs in shallow waters has risen as much as 25% since the Deepwater Horizon rig in the Gulf of Mexico exploded in April.

Insurers may pay out as much as $3.5 billion in claims from the US spill, making it the industry’s costliest accident since the Piper Alpha rig fire in the North Sea in 1988, Moody’s said.

“Pricing for offshore energy liability insurance is sure to trend higher as insurers and reinsurers take stock of their losses and reevaluate the complex risks associated with drilling in deep waters,” Moody’s analyst James Eck wrote in a report.

Publicly traded insurers including Swiss Reinsurance and Munich Re have disclosed $611m of losses to date, Moody’s said.

That will probably rise as the extent of environmental damage becomes clear, the ratings firm said.

BP, which had leased the Deepwater Horizon at the time of the explosion, has spent $1 billion trying to stop the spill and is still struggling to contain the leak.

Lloyd’s of London, which insured the rig’s owner Transocean Ltd, asked a US judge last month to rule it has no obligation to cover BP’s clean-up costs.

BP, based in London, is self-insured against losses and damage claims resulting from the spill, spokesman Scott Dean said last month.