March 8, 2007 by Canadian Underwriter
EQECAT is launching a new Offshore Energy Model to help the insurance industry manage this risk.
Details about the model will be discussed during EQECATs March 2007 Catastrophe Management Conference.
EQECAT noted the storms of 2004-05 caused significant losses in the offshore energy market in the Gulf of Mexico, consuming more than five years of the combined premium for the region.
The driving factors behind EQECATs [new model] were the 2004 and 2005 hurricane seasons, and the resulting offshore energy related losses, which had a significant impact on the availability and affordability of insurance for offshore exposures, coupled with the expected increased hurricane activity over the next decade due to climate change, said EQECAT president Rick Clinton. EQECATs model will help insurers quantify their offshore risks, which can lead to improved pricing and better use of capital.
Quantifying risks for the offshore energy market is markedly different and more complicated than modeling for onshore property risks, EQECAT said in a press release. Most damage onshore is attributed to wind, but losses to the offshore energy market are primarily due to severe waves and currents generated by a storm, as well as undersea landslides, EQECAT said. Moreover, while some of the risks to offshore energy include property-exposures to platforms, wellheads and pipelines, an important component of the risk in the offshore energy market is centered on continuous-production issues.
The offshore energy insurance market also has some special policy conditions that have to be taken into consideration when modeling this risk.
EQECATs Offshore Energy Model covers a range of risk in the Gulf of Mexico region for oil and gas platforms, pipelines, and other offshore energy industry infrastructure. It also takes into account the removal of debris caused by a specific event, business interruption and contingent business interruption.