Oil and natural gas companies are facing several issues as they seek insurance coverage.
“There are several different issues in this space,” said Ryan Edgmon, managing director of the energy division at Higginbotham Insurance and Financial Services.
Edgmon first cited the rising cost of auto insurance for oilfield fleets. The industry has seen claim settlements soar from $50,000 10 or 15 years ago to $500,000 to $1 million today.
“Oil and gas carriers have a target on their back,” he said.
But the biggest pressing issue for oilfield companies is umbrella coverage, policies that Edgmon explained sit over auto, general liability and workers’ compensation coverage.
“A service contractor in the field working for a major operator is required now to carry $10 million in umbrella coverage. Five or 10 years ago, the operator required $5 to $10 million,” he said.
Service contracts are faced with not only increases in umbrella policy premiums, but decreased capacity in obtaining coverage. He said he had a large client carrying a $25 million umbrella policy now pays $1.85 million a year, up from $480,000 several years earlier, and it took four carriers to provide that $25 million.
Companies working in the completions sector may have difficulty finding carriers with an appetite for insuring them, he said. The same for water hauling companies or any business with a heavy truck because “you get in accident, and the first thing people do is call an attorney.”
An issue Edgmon sees on the horizon is cyberattacks. He said he’s had several clients fall victim to spoofing, which happens when a cybercriminal sends an email telling someone to send payment for equipment. At first glance, he said the email looks like it came from the chief financial officer, so the funds are sent and disappear with the cybercriminal.
Just as Texas passed tort reform in 2003 that capped damages victims of medical malpractice can receive, Edgmon said similar tort reform is needed to address the issues with auto and umbrella insurance seen today.
“The easiest way for everyone to win is for legislation to establish guidelines,” he said.
And he is hopeful. “This election cycle is the first time I’ve heard people talking about insurance.”
Source: https://www.mrt.com/oilreport_specialedition/article/oil-gas-insurance-challenges-19885744.php