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0 Offshore Energy Insurance Marine Insurance WP 18 September, 2013 Sydney Hiroaki Kobayashi Melbourne Chief Representative, Tokio Marine & Nichido Fire.

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Presentation on theme: "0 Offshore Energy Insurance Marine Insurance WP 18 September, 2013 Sydney Hiroaki Kobayashi Melbourne Chief Representative, Tokio Marine & Nichido Fire."— Presentation transcript:

1 0 Offshore Energy Insurance Marine Insurance WP 18 September, 2013 Sydney Hiroaki Kobayashi Melbourne Chief Representative, Tokio Marine & Nichido Fire Insurance Co., Ltd. General Manager – Southern Region, Tokio Marine Management (Australasia) Pty. Ltd. Risks in Australia From an underwriter’s perspective

2 1 Self Introduction Graduated from Keio University – Law & Political Science Tokio Marine sponsored Chinese Language Trainee Course at Fudan University in Shanghai Obtained Finance MBA at Graduate School of Waseda University Tokio Marine Fire Insurance Co., Ltd Introduction to aviation insurance Marine Industry Production Dept responsible for offshore energy insurance for regions including North Sea, Vietnam, Sakhalin, Gulf of Mexico, Azerbaijian, Australia Tokio Marine & Nichido Fire Insurance Co., Ltd. Shanghai Representative in charge of Chinese territories Suzhou, Beijing, and Qingtao for all classes of insurance business Marine Industry Production Dept in charge of offshore energy insurance for regions including Australia, North Sea, Gulf of Mexico, Sakhalin, Middle East, Egypt, Brazil. You will be familiar with major projects such as Pluto CAR and Gorgon CAR which I underwrote Melbourne Chief Representative General Manager – Southern Region, Tokio Marine Management (Australasia) Pty Ltd Responsibility for Victoria, South Australia, Western Australia, Northern Territory and Tasmania Management responsibility for major Japanese corporations operating in Australia such as Toyota, Mitsubishi Motor, Mitsubishi Corporation and so on. I am also engaged in various offshore energy projects including Ichthys, Wheatstone, Pluto, Gorgon, Bayu-Undan and North West Shelf Project. Specialized Interest : Offshore Energy Insurance, Environmental Law, International Law

3 (1) Australia has three existing LNG projects with a total capacity of 24.3 million tonnes per annum (mtpa). ・ North West Shelf ・ Bayu Undan ・ Pluto (2) Seven LNG projects are under construction in Australia, with capacity approaching 90 mtpa by the end of the decade. ・ Gorgon ・ Wheatstone ・ QC LNG ・ Gladstone LNG ・ Prelude → FLNG ・ AP LNG ・ Ichthys (3) Other proposal projects may develop with Floating LNG technology. ・ Browse → FLNG ? ・ Sunrise → FLNG ・ Bonaparte → FLNG ? ・ Scarborough → FLNG ? 1. Floating LNG - Australia’s LNG Project Insurance Arrangement for Floating LNG is under pressure – Limited Capacity 2 Source : JOGMEC Source : Shell

4 3 Development Stage Operator's Extra Expense (Cost of Control) Physical Damage ① F-LNG ② subsea Business Interruption Third Party Liability Construction All Risk ① F-LNG ② Subsea Construction All Risk ① F-LNG ② Subsea Delay-in Start-up Maintenance Period Maintenance Period Wells Third Party Liability for drilling activity Third Party Liability for site operation Contractor Third Party Liability / Protection & Indemnity Physical Damage Marine Cargo Operation Stage F-LNG / SURF 1. Floating LNG - Insurance Products for Floating LNG

5 (1)Offshore Energy Insurance is usually placed in the international insurance market, such as Lloyd’s or major continental underwriters. (2)Accepted, Specialized policy wordings are utilized in the Offshore Energy Insurance Market with limited number of underwriters participating. (3)Current capacity of Energy Insurance Market is considered to be around $3.5 billion, which is low compared with the exposures / sums insured of hull and topsides etc.. (4)Advent of new and unproven technology has created difficulties for the underwriting markets. Current trend is to support proven and validated technology. 4 Market Capacity 1. Floating LNG - Offshore Energy Insurance

6 - Integration of Hull and Topsides etc. will constitute the time to procure a higher layer. - Therefore, a detailed schedule containing the milestone dates is critical to build up a layered program. - Energy Insurance Market Depending on capacity required:- - Special Capacity from investment company - Non-Marine (Excess of loss) / Pro-Re - Captive - Oil Insurance Limited (Mutual for oil companies) 5 Layered Program 1. Floating LNG - Offshore Energy Insurance

7 6 Source ; Standard PI Protection & Indemnity Insurance from PI Club can be obtained in order to achieve increased capacity for Construction All Risks Insurance. Protection & Indemnity Insurance 1. Floating LNG - Offshore Energy Insurance Construction Entry into yardExit from YardCommencement of Production Navigation to fieldOperation Standard Poolable P&I CoverStandard Offshore RulesOffshore liabilities extension clause ・ crew ・ pollution from the entered ship ・ wreck removal of the entered ship ・ collision/dock damage ・ carbon/property on board ・ stand alone fixed premium cover ・ P&I risks ・ wreck removal of the unit ・ pollution from the unit ・ personal injury ・ contractual (with prior approval of the managers) ・ arise by reason of the member’s interest in the unit ・ property ・ personal injury ・ chartered ships ・ pollution (subsea) ・ clean-up ・ sue and labour/legal costs ★ The unit must move to Standard Offshore Rules cover at “Commencement of Production” however it is recommended that this should take place on arriving at the field ★

8 Early on 21 August 2009 Timor Sea some 690km west of Darwin and 250km from the Western Australian coast. The H1 well kicked, subsided for two hours, then began flowing uncontrollably with a plume of gas, condensate, water and oil venting into the air above the rig. The rate of discharge was initially estimated at 400 barrels a day, though it may have reached 1500 barrels. Estimates of the resulting surface sheen ranged from 6000 – square kilometres. The discharge was finally stopped in Nov Establishing an adequate limit of liability for Seepage & Pollution Coverage Date : Location : Incident: Source : PTTEP 7 2. Seepage & Pollution Cover after Montara Montara Incident

9 8 Category 1.Oil Pollution Liability from wells (1) Clean up cost (2) Liability (3) Cost of control Responsible Party Oil Company Insurance Operator’s Extra Expense (1) Cost of Control (2) Redrilling Expense (3) Seepage & Pollution 3. Damage to the Rig (1) Rig itself (2) Sue & Labour (3) Wreck of Removal Rig ContractorHull & Machinery 4. Death / Injury of workers on board EmployerWorker’s Compensation Responsible Party and Insurance 2. Seepage & Pollution Cover after Montara 2. Oil Pollution Liability from Rig’s fuel Rig ContractorProtection & Indemnity (Third Party Liability) Injury free offshore evacuation of all 69 personnel onboard the drilling rig Source : PTTEP 5. Fines / Penalties / Punitive DamageOil Company Contractor No Insurance

10 9 ① Blowout Risk Screening ② Blowout Risk Analysis Source ; DNV Limit of Liability (1)It is difficult to determine the exact exposure from a blowout incident to an environmental pollution event. However, rule of thumb is that you cannot buy enough coverage for those exposures. (2)Many oil companies decide limit of liability considering OPOL limit or OPA limit or OIL limit. (3)Following is example how to proceed with a Blowout Risk Analysis. 2. Seepage & Pollution Cover after Montara OPOL : Offshore Pollution Liability AgreementOPA : Oil Pollution Act of 1990OIL : Oil Insurance Limited

11 10 Mobile : +61 (0) TMNF at a Glance Established in 1879, the first P&C Insurance Company in Japan Net Premiums written JPY1,869bn (Approx USD20bn) Total Assets JPY9,708bn (Approx USD90bn) Number of Employees 17,284 Highest Ratings in Japanese market S&P : AA- Moody's : Aa3 AM Best: A++ Fitch : AA- Thank you for attention! Hiroaki Kobayashi Melbourne Chief Representative, Tokio Marine & Nichido Fire Insurance Co., Ltd. General Manager – Southern Region, Tokio Marine Management (Australasia) Pty. Ltd. Tokio Marine Management (Australasia) Level 13, North Tower, 459 Collins Street, Melbourne, VIC 3000 AUSTRALIA


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