NU Online News Service, Sept. 29, 2:58 p.m. EDT
Despite the damage caused from the Deepwater Horizon oil spill in the Gulf of Mexico, the event is expected to have no impact on the property insurance marketplace, an executive from Marsh said.
Duncan Ellis, U.S. leader of the global property practice for insurance broker Marsh said while the oil spill from the Deepwater Horizon caused "quite a bit of environmental damage and garnered a significant amount of media coverage, there was little property damage" caused by the event.
Mr. Ellis made his observations during a webinar sponsored by Marsh titled, "2011: A Strategic Overview of the Insurance Marketplace," part of the firm's Reality of Risk series of webinars.
Mr. Ellis said the estimated $600 million paid out by the insurance industry primarily covered the insured losses from the risk and "there was no property damage to speak of and it will not alter the property market to speak of." He said the insurance industry had no difficulty absorbing the losses.
The Deepwater Horizon rig, which was contracted by British Petroleum, exploded on April 22 killing 11 people. The subsequent sinking of the rig 130 miles southeast of New Orleans, let loose close to 50 million gallons of oil, according to some estimates, fouling the shores of Louisiana and as far east as Florida.
Mr. Ellis said the event would have a modest effect on rates for energy risks, primarily off-shore.
Financial Crisis Response
In response to a question on collateral requirements carriers are accepting in response to the recent financial crisis, Jonathan Zaffino, leader of Marsh's casualty practice, said insurers have become very conservative in the "amount and form of collateral" they are willing to accept. He said there is some "thawing" in what they will accept, but that has been very slight, and that stance is expected to continue going forward.
He said there are a wide range of financing solutions available to policyholders while still adhering to the form of collateral insurers are willing to accept.
Risk managers with loss sensitive programs, such as commercial auto, general liability and worker's compensation are required to post collateral to guarantee payment of claims falling in a large deductible program, Marsh explained in a statement announcing a collateral solutions group.
Social Media
Another questioner asked how cyber risk insurance covers social websites. Chris Lang, managing director of Marsh's financial and professional practice, said while the policies provide universal, fundamental coverage, the emerging risk is in the area of director and officers (D&O) and employers professional liability (EPL) coverage.
Addressing this issue, Chartis recently released a policy to cover "all the interesting ways claims could evolve out of social media," he said.
Mr. Lang explained that what needs to be considered is if a human resource department looks at a social media site of an employment candidate, if the human resource individual is not "completely objective and universal in the way they evaluate the pictures, words" of the candidate "and make a discriminatory evaluation, then a lawsuit could be brought against the employer themselves."
He called this an "unknown and burgeoning area" and clients should have D&O & EPL coverage available along with cyber risk policy.
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