Oil Rig Explosion May Create $1.4 Billion in Losses

05/05/2010

One of the worst oil spills in history may also be one of the costliest to the insurance industry, according to a recent report by the Insurance Information Institute.

The Deepwater Horizon oil rig may cause some $1.4 billion in losses for companies invested in its processes. Types of insurance that will be involved in covering these claims include business interruption insurance, environmental liability, comprehensive general liability, property damage insurance and more.

Workers compensation will be responsible for covering claims related to the 11 deaths resulting from the oil rig's April 22 explosion, according to the report. The leak resulted from a defective blowout preventer, which failed to prevent hundreds of thousands of gallons of oil from entering the Gulf of Mexico.

"The insurance losses from the sinking of the Deepwater Horizon will be significant and one of the largest losses ever for global offshore energy insurance and reinsurance markets," Richard Hartwig, president of the III, said.

Companies with high accident risks are often forced to pay larger business insurance premiums than their safer counterparts.

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