• Massive source of premium to the Insurance companies
• The premium figures are booming.
Do you think the historic supply and demand curve is the only price fixing factor on this particular sector of business?
I don’t think so-.
There is a high competition among insurance providers
Yes - Pricing is highly depend on the risk probability
Oil rigs in the calm ocean are highly exposed to risk.
Some of the key risk factors:
* Tremendous volume of fuel (Crude)
* Massive electromechanical activities which can create ignitions
* Tough accessibility of rescue
* Worst ecological impacts
My friend Mr. Ranjith who is working as the Electrical Instrumentation Engineer for Bapco Baharin pointed out that any of the oil rigs are constructed and maintained by state of art technologies. Utmost care is giving to each and every minute activities. Still the risk factor is high - Friction, Electrical Spark, exposure to the burning sun - all these can cause a disaster.
Deepwater Horizon Drilling Rig
which caught fire, burned for two days, then sank in 5,000 ft of water in the Gulf of Mexico
The insurance industry is forecasting a loss of up to $3.5bn (£2.4bn) from the growing oil spill in the Gulf of Mexico. This will be the biggest energy insurance loss in more than 20 years, and could drive up premiums.
Facts and Figures :
- The rig belongs to Transocean, the world’s biggest offshore drilling contractor
- Builder: Hyundai Heavy Industries
- Cost : 350 Million
As per Reinsurers and Lloyd's of London it is the biggest loss in energy market since Piper Alpha ( Oil Rig Fire on July 6, 1988) will trigger rate rises
Ref : Lloyd's London , Wikipedia.