Owner to retain sizable losses in oil rig explosionReprints
VENICE, Louisiana—Oil drilling contractor Transocean Ltd. will retain a sizable portion of losses from an explosion on a drilling rig in the Gulf of Mexico that left 11 workers missing and a dozen others injured.
The Tuesday explosion occurred aboard the semisubmersible drilling rig Deepwater Horizon about 41 miles off the Louisiana coast. The rig, which subsequently sank, was owned by Zug, Switzerland-based Transocean and operated by BP P.L.C. There were 126 workers on the rig when the explosion occurred.
The cause of the blast was still under investigation as of Friday.
Transocean said in its 2009 annual report that it carries sizable deductibles on most insurance coverage.
The company said in the annual report that it has a deductible of $500,000 to $1.5 million on the loss of any drilling rig in its fleet under its insurance program written by commercial market insurers and captives.
Transocean maintains a $10 million-per-occurrence deductible on crew personal injury liability and a $5 million per-occurrence deductible on other third-party noncrew claims, according to the annual report.
“We also carry $950 million of third-party liability coverage exclusive of the personal injury liability deductibles, third-party property liability deductibles” and other retention amounts, the company said in the report. Transocean retains the risk for liability losses above $950 million.
Lloyd's of London is among insurers that provide coverage for Transocean.
A Lloyd's spokeswoman confirmed that the marketplace “does have some exposure, but it's too early to tell to what extent. We are reviewing contracts to see who has interests in the platform and well other than Transocean and BP,” she said.
The Deepwater Horizon was built in 2001 by Hundai Heavy Industries Shipyard in Ulsan, South Korea, according to Transocean's website. Published reports say the rig cost $350 million to build and could cost up to $700 million to replace.
In a statement, Transocean said it was unable to stem the flow of oil that leaked from the damaged rig. In its annual report, the Swiss-based company acknowledged that “pollution and environmental risks generally are not totally insurable.” The company said it does not carry coverage for loss of revenue unless contractually required.
As for the oil spill, BP said its response includes mobilizing vessels, skimming equipment and other resources to try to contain the leaked oil.
A BP spokesman in London confirmed that the oil giant is self-insured for any losses or expenses related to the accident.