1. International Maritime Offshore Logistics
(IMOL 2011)
INSURANCE FOR THE OFFSHORE SECTOR
Presented by
Prof. A.W.J. (Tony) Fernandez
Consulting Average Adjuster, & Risk Management Consultant
Formerly Visiting Professor of Maritime Law & Insurance Law – Mumbai University
Foreign Associate Member – Association of Average Adjusters of the United States
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 01/30

2. Presentation Overview
1. Managing Risk in the Energy Industry
2. Offshore Operations
3. Drilling Contracts
4. Energy (Oil & Gas) Insurance
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 02/30

3. Gumperson’s Law of Probability
The probability of anything happening is in
inverse proportion to its desirability!
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 03/30

4. Risk Management 1. Risk Assessment – Planning Phase
2. Risk Treatment – Organizing Phase
3. Risk Financing – Motivating Phase
4. Risk Control – Controlling Phase
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 04/30

5. Managing Risk – A Model Hazard Peril Risk Loss Risk Assessment
Organizational
Objectives
Risk
Control
Risk
Treatment
Risk
Financing
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 05/30

6. Property will be damaged in direct proportion
Murphy’s Constant
Property will be damaged in direct proportion
to its value!
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 06/30

7. The Organising Phase of RM
Hazard
Peril
Risk
Loss
Risk
Treatment
Transfer
Reduction
Organizational
Objectives
Residual
Risk
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 07/30

8. The Organising Phase of RM
(Continued)
Hazard
Peril
Risk
Loss
Risk Transfer
By Insurance
Commercial
Insurance
Mutual
Organizational
Objectives
Residual
Risk
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 08/30 8

9. The Organising Phase of RM
(Continued)
Hazard
Peril
Risk
Loss
Risk
Transfer By
Insurance
Contract
Organizational
Objectives
Residual
Risk
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 09/30

10. Offshore Life Cycle 1. Exploration Phase 2. Developmental Phase
3. Exploitation Phase
4. Revival Phase
5. Removal Phase
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 10/30

11. Risk Exposure – Offshore Oil & Gas
1. Causes of Accidents
- Acts of God / Perils of the Seas
- Human Frailty
- Punch-through
- Blowout and Cratering
2. Consequences of Accidents
- Personnel – Injury / Disability & Death
- Physical loss or damage – Partial / Total
- Loss of Production / Loss of Profits
- Liabilities – Legal and Contractual
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 11/30

12. The Foolproof Law It is impossible to make anything foolproof
because fools are ingenious!
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 12/30

13. The Offshore Players 1. The Operator (Venturer / Co-Venturer)
2. The Various Contractors & Sub-Contractors
3. The Various Oil Field Service Providers
4. Other Service Providers (Including Insurers)
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 13/30

14. Fixed Assets – Offshore
1. The Offshore Oil / Gas Field
2. The Reservoir
3. The Well
4. The Platform / Sub-sea Equipment
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 14/30

15. Movable Assets – Offshore
1. Jack-up Drilling Rig
2. Semi-submersible
3. Drill Ships
4. Other Special Purpose Ships
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 15/30

16. Offshore Contracts 1. Responsibility Clause
2. Indemnity & Hold Harmless Clause
3. Insurance Clause
4. Waiver of Subrogation Clause
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 16/30

17. Offshore Insurance For Operations
1. Exploration Drilling
2. Construction
3. Drilling / Production / Work Over
4. Removal of Platforms
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 17/30

18. Offshore Insurance For Operations
1. “All Risks” Cover For Physical Loss / Damage
2. Control of Well (Blowout / Cratering)
3. Re-drilling Expenses / Pollution / Seepage
4. Liabilities – Marine & General
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 18/30

19. Insurance of Legal Liabilities
1. Common Law Liabilities
- Collision Damage Liabilities
- Contact Damage Liabilities
- Other Liabilities to Third Parties
2. Admiralty Law Liabilities
- Maritime Salvage
- General Average
3. Statutory Liabilities
- Removal of Wreck Liability
- Pollution Liability
- Other Statutory Liabilities
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 19/30

20. Insurance of Contractual Liabilities
1. Under the Drilling Contract
- Control of Well Costs
- Re-drilling Expenses
- Pollution – Seepage & Clean-up
2. Under other Contracts
- Down Hole Equipment Contracts
- Contracts of Towage
- Contracts of Carriage
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 20/30

21. Express Warranties In Energy Risk Policies
Tug, Tow, Towage and Storage Warranty
Location Approval for Jack-ups
Jack-up Moves on and off Location
Blowout Preventers
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 21/30

22. Piper Alpha Disaster On July 6, 1988, 167 lives perished on the
Piper Alpha Platform, located in the icy
North Sea. The worst offshore oil accident
In history, the Piper Alpha disaster quickly
revolutionized the offshore oil industry.
Today the offshore oil industry is
dramatically different.
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 22/30

23. Piper Alpha Prior to Disaster
Slide 23/30

24. Piper Alpha What Remained After The Disaster
(1988 – 167 Lives Lost)
Slide 24/30

25. Bombay High North Complex Prior to Disaster
Slide 25/30

26. The BHN Disaster
Slide 26/30

27. MSV SAMUDRA SURAKSHA
Slide 27/30

28. BHN Platform What Remained After The Disaster
Slide 28/30

29. Conclusion Highly Technical Highly Volatile Premium Rates & Wordings
Highly Dynamic - Need Based Policies & Claims
Continuous Learning
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 29/30

30. Acknowledgement With deep affection and respect, I dedicate this
Presentation to Late Mr. Harry Noronha and to
Mr. Narender Menon, with whom I surveyed
and adjusted India’s first Offshore Insurance Claim of “SAGAR VIKAS” Blowout.
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 30/30