Partner Re estimates insured Deepwater Horizon losses could exceed $1 billion

PartnerRe Ltd. (NYSE, Euronext:PRE) estimates insured losses from the explosion and subsequent sinking of the Deepwater Horizon Drilling Platform in the Gulf of Mexico have the potential to exceed $1 billion.The oil platform exploded 50 miles off the Louisiana coast on Apr. 22, resulting in a huge oil spill flowing more than 1,500 metres below where the Deepwater Horizon was wrecked.Eleven workers are missing and presumed dead. The cause of the explosion is not known. “The ultimate insured loss for this event is unclear given the multiple parties involved and the ongoing situation regarding control of the oil spill,” PartnerRe says in a statement. “The company estimates that insured losses from the explosion have the potential to exceed $1 billion. “Given current information, the company expects its second quarter 2010 results will include claims relating to the explosion in the range of $60-$70 million.”These losses would likely be contained within the Global Specialty and Paris Re sub-segments of PartnerRe, the company announced.The Toronto Sun reports BP has $500 million in liability insurance for legal claims through its own insurance captive, Jupiter Insurance Ltd.Fitch Ratings says that although it anticipates BP plc (BP, ‘AA+’/Stable/’F1+’) “will be negatively impacted by the containment and clean-up costs associated with the oil spill in the Gulf of Mexico, it is mindful that insurance coverage will likely cover the majority of these costs, limiting the cash outlay and potential related rating pressure for BP.”Fitch estimates total clean-up and containment costs could be as much as between $2 billion and $3 billion, and “potentially more the longer it takes to arrest the flow of oil into the Gulf.”Fitch cites estimates that the leak is currently around 5,000 barrels of oil a day.In the case of the 1989 Exxon Valdez spill, around 250,000 barrels of oil in total were spilled into Prince William Sound, Alaska, with clean-up costs estimated to have been approximately $2 billion. “Assuming the leak is worse than the Exxon Valdez accident, as environmentalists are now claiming, Fitch estimates around 300,000 to 500,000 thousand barrels of oil could now be in the Gulf,” Fitch says. “If it takes an additional 60 to 90 days to drill a relief well to completely stop the leak, an additional 300,000 to 450,000 barrels could be lost, resulting in a total spill of about 1 million barrels.”