Oil Insurance approves $100-million premium credit

Mutual commercial carrier Oil Insurance Ltd. (OIL) recently approved a $100 million premium credit for members who were shareholders of record as of Dec. 31. 

“This credit will approximate a 16% reduction in total premium charged to the membership during 2013,” Hamilton, Bermuda-based OIL stated in a press release. All figures are in U.S. currency.

The premium credit was approved by OIL’s board of directors at its July meeting.

“OIL is in a strong financial position as a result of healthy investment returns and positive underwriting results over the past 18 months,” president and CEO Robert D. Stauffer said.

For the six months ending June 30, OIL had reported net income of $433 million on premiums written of $651.08 million, compared to a net loss of $21.4 million on premiums written of $645.6 million for the same period in 2012.

During the second quarter of 2012, OIL had lost $415.5 million. In the first six months of 2012, OIL had attributed its loss and loss expenses mainly to 13 new claims relating to the 2012 underwriting year totaling $359.0 million, and seven new claims relating to prior underwriting years totaling $240.7 million.

But this year, OIL reported net income of $76.6 million in the quarter ending June 30.

OIL has more than 50 members in the energy sector. New members announced last month include Calgary-based Cenovus Energy Inc. In order to be a member, a client must have investment grade ratings (at least BBB- from Standard & Poor’s or Baa3 from Moody’s) and at least 50% of gross assets or 50% of annual gross revenues in energy operations. It must also, among other things, have a minimum of US$1 billion in property, plant and equipment (before depreciation plus book value of inventories).

For cargo, construction and terrorism coverage, OIL offers limits of US$300 million.

Windstorm coverage limits vary by region. For example, OIL provides a $150-million part of $250-million windstorm limit for exposures in the Atlantic named windstorm region, with an aggregation limit of US$750 million for claims involving more than five OIL members from one occurrence. Under some conditions, limits are higher in other areas, such as the South China Sea, North Sea, Australia.

OIL also offers pollution coverage, including legal liability for punitive damages, contractual liability for personal/bodily injury and property risk from seepage or contamination. That coverage is on a non-gradual basis and subject to, among other things, a 40-day discovery/120-day reporting requirement.