We'd Write Oil Rig Again, Berkley Execs Say

"Instead, we raised our rates 40 percent. It's a better response," Robert Berkley responded.

William Berkley, who was discussing the Transocean loss as a way to demonstrate how companies like his can distinguish themselves from competitors–by paying claims quickly–later said the prices in the offshore energy segment are up between 40 and 50 percent across the industry.

When a reporter questioned whether rig operators would pay those kind of prices for insurance, the elder Mr. Berkley said that "this may end up being a good opportunity" for insurers because the amount of insurance required for rig operators is likely to increase.

In fact, it may increase so drastically "limits may prove to be so big that few can offer" such large amounts of coverage, he said, singling out Warren Buffett's Berkshire Hathaway as a potential beneficiary since that organization can put out massive limits.

As for W.R. Berkley's response to the Transocean catastrophe, he said, "We were the first company to pay the loss. It didn't cost much to do the right thing."

He said the loss was within the company's expected loss range, and that the claim was paid without any proof of loss.

"CNN gave us the proof," Robert Berkley said.

"We continue to believe that if you do the right thing, customers will recognize that," his father said, adding that when insurers seize the opportunity to respond to the trust that policyholders place in them by paying claims quickly and responsibly, "it is something that gains you value."

On a prior occasion, at the annual UBS Global Financial Services conference earlier this month, he said the company paid its $25 million limit without being paid by its reinsurers.

At the luncheon, he said that after reinsurance recoveries, the net loss for his company will be $5 million.

The younger Mr. Berkley spoke about some of the lessons to be learned from the Transocean experience for the offshore energy industry and insurers. One lesson is based on how the situation was handled "when it became a situation."

Firemen tend to dump water on a fire, and therefore, when the explosion and fire occurred, "the fireboats went out [and] filled the legs of the rig with water," instead of letting it burn in a controlled way. That is what caused the rig to sink, he said.

"The moment the fire started, they could have solved the problem by pumping mud down," his father said later.

Although there are questions to ask and lessons to extract when insurers look at the equipment involved, the operators, and how the event was handled for insurance underwriting purposes, Robert Berkley said, "Yes, we would write it again at the rates we charged."

He added, "But we would write it more happily at 40 percent more," referring to the prevailing rate environment.

Asked directly whether there is a lack of risk management in the offshore drilling industry, William Berkley said there is not.

"Whenever something goes wrong, that's the immediate response. But no one expected these things to happen…No one expected the rig to sink," he said.

Recent events don't give evidence of a lack of risk management. Instead, "there was a lack of understanding of the alternate things that could go wrong," he said.