Insurance coverage for offshore oil rigs in the Gulf of Mexico will rise between 15 percent and 30 percent after BP Plc’s Deepwater Horizon spill, says Lloyd’s of London Chief Executive Officer Richard Ward.
“Prices will have to go up in the Gulf of Mexico,” Ward, 53, said in a Bloomberg Television interview today. “We’ve seen very low prices for covering these offshore installations over many, many years. People recognize that the risks they were pricing a while ago were underpriced and they need to restore pricing levels.”
The BP disaster is likely to be the second-biggest energy insurance loss based on current estimates, said the Insurance Information Institute. The most expensive property loss for energy insurers was a July 1988 explosion aboard the Piper Alpha oil platform in the North Sea, which killed 167 people and cost insurers $3.6 billion in 2009 dollars.
Lloyd’s companies were part of a syndicate that insured the rig owned by Transocean Ltd., which exploded and sank in April. They will likely pay out between $300 million and $600 million in relation to the disaster, the market said in May.