November 6, 2012 by Daryl Angier
In this day and age, no country can afford to navel-gaze. And having an outward-looking perspective is critically important for people doing business in Canada–which boasts one of the most ethnically diverse populations in the world.
This month’s issue takes a close look at what’s going on beyond Canada’s borders to get at the heart of issues that are shaping the insurance industry today.
If you need an example of a truly global catastrophe that’s sure to have far-reaching implications for many countries, just look due South to the Gulf of Mexico. While British Petroleum’s engineering wizards appear to have found a way to stop the nearly three-month-old flow of oil from deep below the ocean’s floor, the story really is only just beginning.
Following a June meeting with U.S. President Barack Obama, BP agreed to set aside $20 billion over the next three years to fund spill-related claims; and it’s likely every cent of that money will be paid out. To date, BP has already received 114,000 claims submissions and has paid out more than $200 million (US) to 32,000 of them.
It’s important to note BP is self-insured–no insurance company in the world could ever provide enough coverage for losses of this magnitude.
Meanwhile, worldwide suspicion of the oil industry has risen since the disaster; which means any oil-producing nation, Canada included, will be subject to global criticism. That being the case, it’s no surprise that in early July, a San Francisco-based environmental group set its sights on the Athabasca tar sands in Northern Alberta by launching an ad campaign in major-market media outlets that encouraged potential U.S. tourists to “Rethink Alberta.”
Already, the spill is having its effect on the insurance industry. Insurers that provide coverage for oil exploration are musing about adding exclusions to policies for deep water drilling. And, as companies redefine their notions of risk in the face of this disaster, we’ll watch what happens with rates for coverage of any type of environmental risk both within and beyond the oil and gas sector.
The Gulf of Mexico oil spill may well be one of those watershed events that shakes the insurance industry to its foundations, forcing it to think afresh about where premiums should be set, and what the industry will or won’t cover going forward.
Time will tell.
Daryl Angier 416-764-1323
© Copyright 2010 Rogers Publishing Ltd. This article first appeared in the July/August 2010 edition of Canadian Insurance Top Broker magazine.
This story was originally published by Canadian Insurance Top Broker.