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Marsh: Oil Spill in Gulf of Mexico May Affect Domestic, International Insurance Markets

Source: Marsh

Posted on 03 May 2010

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Crude oil continues to spill into the Gulf of Mexico and has now washed ashore, following the offshore drilling rig explosion of April 20. Among the industries affected are the hotel, restaurant, fishery, and tourism businesses along the Louisiana Coast.

'This is an operational loss, which will have an impact on both the domestic and international markets,” noted Tracey Cole, Senior Vice President, Marsh Energy Practice.

"It is still early, but as energy markets are reviewing rig accounts, we expect to see rate increases and further review of deductible levels," Cole explained. "Because this is one of the first deep water control of well incidents, the impact will be significant. To mitigate potential losses, we recommend that clients ensure they have adequate control of well and physical damage limits and/or consider purchasing higher limits for deep water control of well.”

Chris Smy, Global Environmental Practice Leader, added that "the catastrophic environmental event has the potential to not only cause damage to natural resources, but also to contaminate public and private property. Environmental insurance coverage can protect property owners against pollutants coming from their properties as well as those migrating onto their properties."

The Marsh Marine team is also monitoring the incident closely for impact on the industry, market conditions, or the costs associated with the loss.

"At this time, we do not anticipate any severe rate changes on marine renewals occurring within the next 30 to 60 days," said Guy P. Claveloux, Managing Director, U.S. Marine Practice Leader.

The U.S. Department of Homeland Security has declared the spill to be of "national significance," and the government is mobilizing resources for the cleanup efforts, according to news reports.