NU Online News Service July 27, 3:38 p.m. EDT
Global investors are asking for energy companies' oil spill prevention measures and information about underwriting changes resulting from the British Petroleum oil spill, according to CERES, a network of investors and environmental groups.
CERES said in a conference call that letters–signed by 58 global investors with collective assets totaling more than $2.5 trillion–were sent to chief executive officers at 27 oil and gas companies. Those who signed the letters include the New York State comptroller, California state treasurer, Florida State Board of Administration and the U.K.-based Local Authority Pension Fund Authority Forum.
Sharlene Leurig, Insurance Industry Program senior manager at CERES, told NU Online News Service that insurers receiving the letters have been named as having sustained some amount of loss from the BP oil spill. One of the recipients, Lloyd's, incurred the highest losses, estimated at $600 million.
Lloyd's did not immediately respond to a request for a statement about the letter.
"We asked insurers how they might respond to this event by potentially either changing their exposures to offshore operations, or by reevaluating their terms and conditions or their underwriting standards for those operations," Ms. Leurig said.
She added that the oil spill in the Gulf of Mexico hopefully will not be too painful a lesson for insurers. Rather, she expressed hope that the event will help them realize some of the ways the "alternative oil extraction practices that have emerged in recent years might pose threats or risks [and] that [insurers] could help to manage their exposure by better understanding the kind of contingency plans that companies have in place."
She said she also hopes the spill will help insurers to understand "not only measures their insureds are taking, but measures the contractors are taking as well. It can be the action of a contractor who exposes the insurer to some loss."
A letter to Evan G. Greenberg, chairman and CEO of ACE, requested "additional information on the measures and programs ACE has in place for managing exposure to risks posed by its offshore oil and gas underwriting," Ms. Leurig said
"We are also interested in learning more about any changes the company is considering in its underwriting standards as a result of the recent Gulf of Mexico Spill," she added.
The letter asks for responses by Nov. 1.
Ms. Leurig observed that the insurance industry has played a big role in the safety of automobiles by advocating for public policy revisions or by working on technology safety standards.
The automobile industry, she said, provides a good model "for how they may be able to apply that to other sectors and other technologies."
Ms. Leurig said that as oil and gas producers venture into alternative types of technologies, they pose novel risks to insurers. "It's important for insurers to play an active role with companies they insure, to make sure those companies are developing appropriate risk management protocols within their operations and those of their contractors," she added.
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