NU Online News Service

Insured losses from the recent explosion of the Deepwater Horizon Drilling Platform in the Gulf of Mexico could reach $1.5 billion, according to Transatlantic Holdings, Inc.

Mike Sapnar, chief underwriting officer for domestic operations for New York-based Transatlantic, an international reinsurance organization, said during the company's first-quarter 2010 results conference call, that he expects Transatlantic's losses to be less than 1 percent of industry losses.

Partner Re estimated total insured losses from the explosion could exceed $1 billion, but noted that ultimate insured losses are unclear "given the multiple parties involved and the ongoing situation regarding control of the oil spill." The Pembroke, Bermuda-based company said its own losses could reach $60-70 million.

Hannover Re indicated its losses could total approximately EUR40 million ($53.2 million at current exchange rate).

"Therewith, we remain considerably below our major loss expectancy for the second quarter," Hannover Re CEO Ulrich Wallin said in a statement.

John Nevius, an expert in environmental insurance coverage and a shareholder at law firm Anderson Kill & Olick's New York office, said it is too early to predict how claims will unfold, but he said it is certain there will be many. He noted the first lawsuits already have been filed.

Speaking to coverages that may be involved, Nevius said that in addition to traditional liability and business interruption insurance, specialty spill-related or other environmental cleanup coverage is available domestically, generally on a surplus or specialty market basis.

Offshore international underwriting syndicates, including the London market, likely will face large claims as well, he said.

He noted, however, that many organizations have been known to accept large portions of major oil-spill risks themselves through self insured retentions or fronting policies.

"Major legal disputes over coverage liabilities are almost certain, given the scope of the environmental disaster and the stakes involved, including the impacts on fishing and tourism," Nevius said.

As owners of the well and offshore rig at issue, he said BP PLC and Transocean, Ltd.--a Geneva, Switzerland-based exploration company--could face potential liabilities.

Nevius also noted it is unclear whether, and to what extent, BP or Transocean have business interruption coverage, but he said BP was reportedly leasing the rig for $500,000 per day.

He said Cameron International Corp. and Halliburton Co. have also been identified in the media as having potential liability.

"There is plenty of potential liability to apportion at this point, but things are only likely to grow more complex," Nevius said, adding that many companies in the petroleum business have complex risk management programs in-place.

Special Reports /

Oil Platform Explosion Insured Losses Could Hit $1.5B

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