Chairman and CEO of Willis Group Joe Plumeri, has told senior executives from the oil and gas industry that despite natural and man-made catastrophes in recent years, the insurance market supporting the energy industry has risen to the challenge, providing abundant capacity, helping to improve loss records and finding solutions to enable new technologies.
Speaking at the broker’s inaugural Willis North American Energy Conference in San Antonio, Texas, Mr Plumeri said that the oil and gas industry is the most exposed of any industry to risk, facing everything from legal risks to operational, political, reputational and terrorism risks. In his speech, he highlighted the most pressing challenges facing the industry and examined ways in which the insurance industry is responding.
In his keynote address to over 100 CEOs, CFOs and risk managers from the energy world, Plumeri cited the recently released Willis Energy Market Review which shows that even after the unprecedented $2.56 billion Macondoloss, insurers are still providing record capacity levels for upstream business, with capacity at a ten-year high for downstream business.
The report, he said, also suggests a link between the much improved overall loss record (excluding windstorm damage) in the downstream sector since 2001, and the deployment of engineering expertise from insurers and brokers into companies’ risk mitigation strategies.
Commenting on the role of insurance as an enabler of new technology in the energy industry, Mr Plumeri said, “The race is on to develop hydrocarbons from shale deposits and ultra-deep water fields. This race is going to involve the deployment of increasingly sophisticated technology – and the attendant risks will provide a major challenge for the insurance industry.”
Mr Plumeri spoke about the integral role that insurance plays in ensuring the commercial sustainability of the energy industry, particularly in the environmental sphere. He gave an example of Willis’ involvement in finding insurance solutions for the world’s most ambitious offshore wind project off the coast of East Anglia in the UK. Once operational, the project will deliver enough clean energy to light some five million British homes, he said, equal to about 10 percent of household energy needs.
“It is projects like these that show why insurance is critical to sustainability. We’re helping to unlock the capital necessary to not only test new technologies, but to scale them up so that our global economy can continue to grow without inflicting serious damage on our planet,” Mr Plumericoncluded.