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Issue 106 - 18th June 2010
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BP row spilling over as US looks at liability limits
As senior management from embattled BP were put under the microscope by a US Congressional Committee enquiry into the events of the Deepwater Horizon loss there has been increasing disquiet over the push by various US politicians to seek to redraw the Oil Pollution Act (OPA 90). Under the terms of the act the limit to a firm for the financial losses incurred as a result of an oil spill is set at $75 million while the clean up costs are unlimited. BP has already said that the $75 million limit is moot and it has set up the $20 billion fund to pay compensation claims although it has been stressed the fund could be increased if the figure is exceeded. It has not stopped some though to look to scrap the $75 million limit with views ranging from an unlimited compensation clause to a limit of $1billion. The International Chamber of Shipping has led the maritime industry’s response calling the move unnecessary and saying that the shipping industry should not be lumped in with the oil and energy exploration sectors. It added that there has never been a shipping pollution incident in the US which has seen the £75 million limit breached. The insurance industry has been none too impressed either with senior London market figures having been in touch with their US contacts to make their position clear. That position is that should there be an increase in the $75 million limit to $1 billion or an unlimited figure the market will not provide the insurance coverage to the energy and shipping firms as the potential liabilities will be simply too large for the market to adequately cover. Particularly so with the impact of Solvency II and the need for capital provision to meet potential accumulations for one in a hundred year events. One senior Lloyd’s underwriter said: “The fact is that if they do change the figure there will not be the available capacity to meet the demands of the markets. It has been expressed to the US legislators but the matter is in their hands. I do not think we can have made our position any clearer.” As has been reported in the media RSA Chairman Sir John Napier has been in contact with US President Obama to criticise the way in which BP has been vilified as the sole cause of the disaster despite the rig being owned by Transocean and the role played by US corporate giant Halliburton.
XL Re in Florida first
XL Re Chief executive James Veghte has praised the state of Florida after the underwriter became the first of the Bermudan reinsurers to be admitted as an “eligible reinsurer” in the state. XL Capital’s global reinsurance subsidiary has received approval from the Florida Office of Insurance Regulation to qualify as an eligible reinsurer. “XL Re Ltd is the first Bermuda reinsurer to receive such approval since Florida passed a rule based on 2007 legislation allowing the Office to establish lower collateral requirements for foreign reinsurers that are highly rated and financially sound. In its consent order, the Office cited various reasons for granting approval to XL Re Ltd including its secure financial strength ratings and its domiciliary regulatory jurisdiction,” said the underwriter in a statement to announce the move. Mr. Veghte, Chief Executive of XL’s Reinsurance Operations, said: “This is good news for XL Re, the Bermuda market, and Florida. We are encouraged that Florida is helping lead the way in elimination of unnecessary collateral requirements on foreign reinsurers. We remain fully committed to meeting the reinsurance needs of our clients in Florida and around the globe.”
Willis responds to distress as property values fall
Willis North America, is to form a Distressed Assets Practice to advise clients on managing the risks associated with financially distressed, foreclosed or abandoned properties and to provide a range of insurance solutions. The new unit will be headed by Brian Ruane, National Real Estate and Hotel Practice Leader for Willis. It will bring together resources and expertise from Willis’ Real Estate and Hotel, Construction, Environmental, Executive Risks, Financial Services and Mergers & Acquisitions practices and its Loan Protector unit to serve the unique risk management needs of all industry players. These include property owners, developers, investors, lenders, receivers, special servicers and others active in the distressed assets space. According to industry reports, an estimated $1.4 trillion in commercial real estate loans will need to be refinanced between now and 2014. Of those, about 60 percent are “under water,” where the loan exceeds the value of the asset. The real estate market collapse has seen commercial property values plummet 42 percent nationally since 2007. There is now $245 billion of distressed commercial assets in the U.S., up 40 percent in the last year alone. On the residential front, things are similarly troubled, with a record high 10 percent of all mortgagors having missed at least one payment. Many of these assets will be moved to financial institutions during the foreclosure process, and some will become Real Estate Owned (REO), others sold, and others will become the responsibility of receivers and special servicers. “The burst real estate bubble has created an avalanche of distressed assets today that only seems to be growing. In this challenging environment, there is a great need for sound, objective risk management advice and specialized expertise,” said Don Bailey, Chairman and CEO of Willis North America. “Our new Distressed Assets practice brings together all of our industry-leading capabilities and knowledge to deliver a coordinated response to every potential risk area associated with distressed assets. Our objective is to help all industry players reduce and manage their risks and turn distressed assets into productive assets.”
Lloyd’s in fact finding effort to Chile
As the people of Chile continue to recover from the earthquake which struck the country, Lloyd’s, has revealed it has sent a high powered team has been sent to Chile to help the market better understand the impact of February’s earthquake and “assist in ensuring the speedy payment of valid claims”. The delegation which is made up of representatives from the Lloyd’s market and Xchanging Claims Services (XCS), arrived in Chile yesterday and will stay in the country until June 25, meeting with local loss adjusters, cedants, brokers and other interested parties. Philip Godwin, Senior Claims Manager at Lloyd’s and Chair of the Chile Cat Co-Ordination Group, said: “The primary role of the group will be to understand the challenges that the local cedants are facing, how they are working with loss adjusters, and to discuss where there are opportunities to maximise the claims process and information flow between Lloyd’s and the local market. We see this visit as an integral part of helping our cedants with their claims response.” “The visit was organised after strong interest from Chilean cedants and local brokers, and reflects the market’s desire for delivering an effective claims handling service,” added a Lloyd’s spokesman.
London market team record song for England
A World Cup song recorded by a group of city workers including staff from the insurance industry has become an internet hit thanks to vintage comic star Charlie Chaplin. Mark Gibbons and Tony Whitelock of broker JLT along with Paul Dacey and Richard Goodworth from insurance intelligence experts Control Risks are part of the group which has recorded the song “Bring it back to Blighty” in support of England’s team in the FIFA World Cup. The song has been written by Mo Park and Stuart Fern after Mr Park acquired an old film tin on internet site e-bay and discovered that it contained a rare lost film starring Charlie Chaplin which is estimated to be worth around £1 million. The film includes a song entitled “See you back home in Blighty” on which Mr Park and Mr Fern based their effort. It has been posted in YouTube and is receiving thousands of hits become somewhat of a cult favourite.
Jon Guy
Editor
Global Broker & Underwriter
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