American Oil and Gas Reporter - December 2018 - 79

SpecialReport: Insurance Update
frequency of losses.
On the contractor side, pricing of coverage for drilling rigs, workover rigs and
other onshore oil field equipment remains
competitive. However, the uptick in activity
has impacted some of the larger facilities
for land rigs and other onshore equipment.
The named windstorms (NWS) of 2017-
Harvey, Irma and Maria-and the major
2018 NWS that made landfall in the United
States-Florence and Michael-had minimal
impact on offshore oil and gas fields in the
Gulf of Mexico. However, they have served
as a reminder to the insurance market of
how devastating such storms can be to offshore and near-coast assets. The various
insurers in this space have a finite amount
of NWS capacity, regardless of whether
the risk is offshore platforms and rigs,
coastal power plants and refineries, or
high-rise condos and luxury hotels.
As we look to 2019, there is widespread
conjecture that underwriters are likely to
choose to reduce capacity for both the
U.S. Gulf of Mexico offshore and coastal
industrial/infrastructure in favor of condominiums and hotels, especially in Florida.
However, it should be noted that some
niche players will continue to write excess
wind coverage. Some insurance providers
actually may increase their capacity
outlays to the Gulf of Mexico both for
offshore assets and industrial exposures
along the coast. NWS rates are not yet to
where they were in the mid-2000s, but it
is not inconceivable that some opportunistic carriers may consider jumping
into the mix, especially if there is a retraction of NWS capacity in 2019.
Underwriters have been concerned
about the offshore contractor/construction
space for several years (rig decommissioning, the sporadic work on the Outer
Continental Shelf and the quality of the
crews). However, while there is significant
upward pressure on rates, some deals
still can be had for loss-free insurance
buyers. These deals may gain more traction
as activity in the U.S. Gulf of Mexico
shows signs of life.
Liability And Auto
Market renewals for U.S. energy business liability is seeing flat to modest increases of up to 5 percent. However, contrary to many predictions, the liability
markets seem to be disregarding the
impact of the 2017 NWS and California
wildfire losses on the overall industry.
The impact of 2018 NWS losses remains
to be seen but, as noted, the U.S. upstream

and midstream energy sectors seem to
have been largely spared, at least so far.
While the softening of the U.S. primary
casualty market appears to have slowed, it
is not clear if the market has bottomed out.
All of this said, business auto coverage,
especially business auto liability, continues
to be a thorn in most insurance carriers'
(and brokers') sides, with fewer and fewer
markets willing to offer monoline auto.
Health, safety and environment managers
need to implement, maintain and enforce
best-practice driving, and vehicle use programs also are important. Using cell phones
while operating a vehicle and driver fatigue
are huge loss factors in auto accidents
across North America, and jury awards in
U.S. courts across the country reflect that.
In many cases, those awards are paid out
by insurance companies.
This trend on business auto insurance
spans the United States and is across
many different industries, not just oil and
gas. The bigger the truck, the harder it is
to obtain coverage. It is essential to
operate a well-maintained fleet of vehicles
and employ drivers who have very good
records on their commercial driver licenses.
Some umbrella and/or excess liability
markets are requiring a $5 million attachment point to sit above business auto
liability, especially for companies operating
large fleets of heavy trucks. This can, in
turn, increase the premiums paid to the
insurance company providing the business
auto coverage.
Certain insurance providers remain
very leery of underwriting risks in some
areas. For example, some carriers are
very selective about insuring operations
of any kind in the state of Oklahoma because of the recent link of seismic activity
to oil and gas-related activity in the state.
Another example is a reluctance of many
insurance companies to underwrite auto
liabilities in the Permian Basin as a result
of the large amount of losses that have
occurred in the West Texas region.
Renewals outside of the United States
continue to see less reductions and are predominantly flat, with some long-term deals
available for larger risks with fewer claims.
Smaller insureds in the energy and/or marine
space that have international operations
have very few choices for liability coverage
outside of the Unites States and Canada.
Finally, in the midstream and downstream sectors, with the 2018 reinsurance
treaty renewals not as steeply priced as
prophesied, renewals are expected to face

flat to modest (up to 5 percent) increases
on clean midstream/downstream business.
Exposures in the tier one and two areas
may face greater challenges, but creativity
in renewal placements can help limit cost
increases, for example, adjusting NWS/catastrophe (CAT) deductibles, reducing
NWS/CAT sublimits and buying excess
over sublimits, separating NWS/CAT
policies, using NWS/CAT carve-outs or
buy-downs, etc.
The good news for oil and gas insurance
buyers is that 2018 reinsurance renewals
were not as dire as some had predicted.
As a result, insurance renewal pricing
for loss-free accounts appears to be trending toward flat to only modest increases.
Obviously, accounts with recent losses
are facing steeper increases and challenges
in finding alternatives.
More of the same can be expected
for 2019 renewals. However, one the
general take-aways of note is that the
London insurance market is undergoing
a reassessment of various specific coverage lines, which may result in significant
repatriation of energy-related insurance
placements and premiums back into the
U.S. insurance market.
r

TED
DIMITRY

Ted Dimitry is first vice president
and unit manager of Alliant Insurance
Services Inc.'s energy and marine
group in Houston. As a retail broker
specializing in oil and gas insurance
and risk management, he advises producers/operators, contractors and
other clients active in both onshore
and offshore operations. With more
than two decades of experience, Dimitry joined Alliant Insurance in 2015
after working for a variety of insurance
brokers, including Aon, Marsh,
Wortham, GEM Insurance Agencies
(BancorpSouth Insurance), McGriff,
Seibels & Williams, and Hays Companies. He holds a B.A. from Washington and Lee University and an
M.B.A. from Rice University.
DECEMBER 2018 79



American Oil and Gas Reporter - December 2018

Table of Contents for the Digital Edition of American Oil and Gas Reporter - December 2018

Contents
American Oil and Gas Reporter - December 2018 - Intro
American Oil and Gas Reporter - December 2018 - 1
American Oil and Gas Reporter - December 2018 - 2
American Oil and Gas Reporter - December 2018 - 3
American Oil and Gas Reporter - December 2018 - 4
American Oil and Gas Reporter - December 2018 - Contents
American Oil and Gas Reporter - December 2018 - 6
American Oil and Gas Reporter - December 2018 - 7
American Oil and Gas Reporter - December 2018 - 8
American Oil and Gas Reporter - December 2018 - 9
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