Risk Management - Insurances, Offshore Insurance

The offshore sector of the oil and gas industry is renowned for being a high risk industry. The financial risk to operators, service companies, contractors and sub-contractors is immense, as each day they provide services in a high risk environment where a small mistake can have disastrous affects on both human life and expensive property. It is therefore very important that all parties engaged are armed with the correct insurance to cover all potential liabilities.

All major oil and gas related companies usually require a minimum of £5m employer’s liability, £5m public liability and some level of professional indemnity cover, usually no less than £1m. This insurance must cover work on all offshore platforms, barges or ships. It is also advisable to ensure that the insurers will cover your type of profession, as rope access or NDT technicians may be higher risk that others, and therefore attract a higher premium.

The final area to look out for when addressing your insurance needs is any additional contractual requirements imposed on your insurance policy. The three most common are:-

1. Contractual Liability

It is becoming more common in the oil and gas sector for suppliers insurance policies to contain the inclusion of contractual liability coverage so the insurer can make good on the obligations and promises made in the contractual agreement with the client. If the supplier’s policy excludes this coverage, they may have an obligation to pay damages for breach of contract should they be unable to continue with the work, or hire someone else in to do it.

2. Additionally Insured

The supplier may be contractually obliged to add the client as an additionally insured entity on their policy. This does not mean the client does not require their own insurance; it simply means that if the supplier was responsible for a claim, their insurance would cover the liabilities of both parties. Should the liability arise as a result of an action by the client, the client’s policy would provide coverage.

3. Waiver of Subrogation

The client may include a clause that ‘waives the right of subrogation’ or ‘rights of recourse’ against them by the supplier and their insurer. Essentially this means that the supplier and their insurer cannot recover any debts related with a claim from the client and their insurer.

Risk Management - Insurances, Offshore Insurance

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