Presented by Presented by
Prof. A.W.J. (Tony) FernandezProf. A.W.J. (Tony) Fernandez
Consulting Average Adjuster, & Risk Management ConsultantConsulting Average Adjuster, & Risk Management ConsultantFormerly Visiting Professor of Maritime Law & Insurance Law – Mumbai UniversityFormerly Visiting Professor of Maritime Law & Insurance Law – Mumbai UniversityForeign Associate Member – Association of Average Adjusters of the United StatesForeign Associate Member – Association of Average Adjusters of the United States
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 01/30
International Maritime Offshore LogisticsInternational Maritime Offshore Logistics(IMOL 2011)(IMOL 2011)
INSURANCE FOR THE OFFSHORE SECTOR INSURANCE FOR THE OFFSHORE SECTOR
Presentation OverviewPresentation Overview
1. Managing Risk in the Energy Industry1. Managing Risk in the Energy Industry
2. Offshore Operations2. Offshore Operations
3. Drilling Contracts3. Drilling Contracts
4. Energy (Oil & Gas) Insurance4. Energy (Oil & Gas) Insurance
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 02/30
Gumperson’s Law of ProbabilityGumperson’s Law of Probability
The probability of anything happening is in The probability of anything happening is in inverse proportion to its desirability!inverse proportion to its desirability!
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 03/30
Risk Management Risk Management
1. Risk Assessment – Planning Phase1. Risk Assessment – Planning Phase
2. Risk Treatment – Organizing Phase2. Risk Treatment – Organizing Phase
3. Risk Financing – Motivating Phase3. Risk Financing – Motivating Phase
4. Risk Control – Controlling Phase4. Risk Control – Controlling Phase
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 04/30
Managing Risk – A ModelManaging Risk – A Model
RiskAssessment
Risk Treatment
Risk Financing
RiskControl
OrganizationalOrganizationalObjectivesObjectives
Hazard
Peril
Risk
Loss
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 05/30
Murphy’s ConstantMurphy’s Constant
Property will be damaged in direct proportion Property will be damaged in direct proportion to its value!to its value!
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 06/30
The Organising Phase of RMThe Organising Phase of RM
RiskTreatment
Risk Transfer
RiskReduction
ResidualRisk
OrganizationalOrganizationalObjectivesObjectives
Hazard
Peril
Risk
Loss
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 07/30
The Organising Phase of RMThe Organising Phase of RM(Continued)(Continued)
Risk TransferBy Insurance
CommercialInsurance
MutualInsurance
ResidualRisk
OrganizationalOrganizationalObjectivesObjectives
Hazard
Peril
Risk
Loss
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 08/30
The Organising Phase of RMThe Organising Phase of RM(Continued)(Continued)
RiskTransfer
ByInsurance
ByContract
ResidualRisk
OrganizationalOrganizationalObjectivesObjectives
Hazard
Peril
Risk
Loss
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 09/30
Offshore Life Cycle Offshore Life Cycle
1. Exploration Phase1. Exploration Phase
2. Developmental Phase2. Developmental Phase
3. Exploitation Phase3. Exploitation Phase
4. Revival Phase 4. Revival Phase
5. Removal Phase 5. Removal Phase
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 10/30
Risk Exposure – Offshore Oil & GasRisk Exposure – Offshore Oil & Gas
1. Causes of Accidents1. Causes of Accidents- Acts of God / Perils of the Seas- Human Frailty - Punch-through- Blowout and Cratering
2. Consequences of Accidents2. Consequences of Accidents
- Personnel – Injury / Disability & Death - Physical loss or damage – Partial / Total - Loss of Production / Loss of Profits- Liabilities – Legal and Contractual
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 11/30
The Foolproof LawThe Foolproof Law
It is impossible to make anything foolproof It is impossible to make anything foolproof because fools are ingenious!because fools are ingenious!
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 12/30
The Offshore Players The Offshore Players
1. The Operator (Venturer / Co-Venturer)1. The Operator (Venturer / Co-Venturer)
2. The Various Contractors & Sub-Contractors2. The Various Contractors & Sub-Contractors
3. The Various Oil Field Service Providers3. The Various Oil Field Service Providers
4. Other Service Providers (Including Insurers)4. Other Service Providers (Including Insurers)
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 13/30
Fixed Assets – Offshore Fixed Assets – Offshore
1. The Offshore Oil / Gas Field1. The Offshore Oil / Gas Field
2. The Reservoir2. The Reservoir
3. The Well3. The Well
4. The Platform / Sub-sea Equipment4. The Platform / Sub-sea Equipment
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 14/30
Movable Assets – Offshore Movable Assets – Offshore
1. Jack-up Drilling Rig1. Jack-up Drilling Rig
2. Semi-submersible2. Semi-submersible
3. Drill Ships3. Drill Ships
4. Other Special Purpose Ships4. Other Special Purpose Ships
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 15/30
Offshore ContractsOffshore Contracts
1. Responsibility Clause1. Responsibility Clause
2. Indemnity & Hold Harmless Clause2. Indemnity & Hold Harmless Clause
3. Insurance Clause3. Insurance Clause
4. Waiver of Subrogation Clause4. Waiver of Subrogation Clause
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 16/30
Offshore Insurance For OperationsOffshore Insurance For Operations
1. Exploration Drilling 1. Exploration Drilling
2. Construction2. Construction
3. Drilling / Production / Work Over3. Drilling / Production / Work Over
4. Removal of Platforms4. Removal of Platforms
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 17/30
Offshore Insurance For OperationsOffshore Insurance For Operations
1. “All Risks” Cover For Physical Loss / Damage 1. “All Risks” Cover For Physical Loss / Damage
2. Control of Well (Blowout / Cratering)2. Control of Well (Blowout / Cratering)
3. Re-drilling Expenses / Pollution / Seepage3. Re-drilling Expenses / Pollution / Seepage
4. Liabilities – Marine & General 4. Liabilities – Marine & General
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 18/30
Insurance of Legal LiabilitiesInsurance of Legal Liabilities
1. Common Law Liabilities- Collision Damage Liabilities
- Contact Damage Liabilities
- Other Liabilities to Third Parties
2. Admiralty Law Liabilities - Maritime Salvage - General Average
3. Statutory Liabilities- Removal of Wreck Liability- Pollution Liability- Other Statutory Liabilities
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 19/30
Insurance of Contractual LiabilitiesInsurance of Contractual Liabilities
1. Under the Drilling Contract1. Under the Drilling Contract
- Control of Well Costs
- Re-drilling Expenses
- Pollution – Seepage & Clean-up
2. Under other Contracts2. Under other Contracts - Down Hole Equipment Contracts - Contracts of Towage - Contracts of Carriage
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 20/30
Express Warranties In Energy Risk PoliciesExpress Warranties In Energy Risk Policies
Tug, Tow, Towage and Storage WarrantyTug, Tow, Towage and Storage Warranty
Location Approval for Jack-upsLocation Approval for Jack-ups
Jack-up Moves on and off Location Jack-up Moves on and off Location
Blowout PreventersBlowout Preventers
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 21/30
On July 6, 1988, 167 lives perished on the
Piper Alpha Platform, located in the icy
North Sea. The worst offshore oil accident
In history, the Piper Alpha disaster quickly
revolutionized the offshore oil industry.
Today the offshore oil industry is
dramatically different.
Piper Alpha DisasterPiper Alpha Disaster
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 22/30
Piper Alpha Prior to DisasterPiper Alpha Prior to Disaster
Slide 23/30
Piper Alpha What Remained After The DisasterPiper Alpha What Remained After The Disaster(1988 – 167 Lives Lost)(1988 – 167 Lives Lost)
Slide 24/30
Bombay High North Complex Prior to DisasterBombay High North Complex Prior to Disaster
Slide 25/30
The BHN DisasterThe BHN Disaster
Slide 26/30
MSV SAMUDRA SURAKSHAMSV SAMUDRA SURAKSHA
Slide 27/30
BHN Platform What Remained After The DisasterBHN Platform What Remained After The Disaster
Slide 28/30
ConclusionConclusion
Highly TechnicalHighly Technical
Highly Volatile Premium Rates & WordingsHighly Volatile Premium Rates & Wordings
Highly Dynamic - Need Based Policies & Claims Highly Dynamic - Need Based Policies & Claims
Continuous LearningContinuous Learning
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 29/30
AcknowledgementAcknowledgement
With deep affection and respect, I dedicate this
Presentation to Late Mr. Harry Noronha and toto
Mr. Narender Menon, with whom I surveyed
and adjusted India’s first Offshore Insurance
Claim of “SAGAR VIKAS” Blowout.
IMOL-2011, Insurance For The Offshore Sector © Prof. A.W. J. (Tony) Fernandez, Slide 30/30
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