Companies with exposure to the sinking of the Deepwater Horizon oil rig in the Gulf of Mexico are insured for losses totaling about $1.4 billion, according to initial reports from the companies involved in the incident as well as early insurance and reinsurance industry estimates compiled by the Insurance Information Institute (I.I.I.).
"The insurance losses from the sinking of the Deepwater Horizon will be significant and one of the largest losses ever for global offshore energy insurance and reinsurance markets," said Dr. Robert Hartwig, an economist and the president of the I.I.I., in a release. "The risks inherent in carrying out such a complicated endeavor, however, are well-syndicated, with the insured loss spread across a broad spectrum of insurers and reinsurers on a global scale."
The fire, explosion, and tragic loss of life preceding the sinking of the Deepwater Horizon oil rig on April 22 are believed to have been caused by an ineffective blowout preventer. Blowout preventers are designed to shut down an operational well and prevent oil from leaking into open waterways. The device's apparent failure to do so in this instance set the stage for the release of millions of gallons of oil into the Gulf of Mexico.
The most expensive oil rig loss in world history occurred with the explosion and fire of Occidental Petroleum's Piper Alpha facility in the North Sea in 1988, which killed 167 workers (compared to the 11 deaths in the Deepwater Horizon incident). Insured losses from the 1988 incident totaled $3.4 billion in 2009 dollars, even though the event was not accompanied by a significant release of oil into the environment.
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