Re-insurance cover limits oil leak exposure for QBE
QBE scrip rebounded after the company said that re-insurance cover would limit the group’s exposure to the BP oil rig disaster in the Gulf of Mexico.
The oil leak at the BP well is looming as one of the largest environmental and commercial liability events in history, as millions of litres of oil continues to spew across the US coastline.
The oil slick was heading towards the Florida coast and threatening the state’s pristine beaches and lucrative tourism industry.
QBE is a member of an insurance syndicate that has provided up to $US1 billion of liability to cover BP in the event of an incident.
In a statement to the ASX, the insurer said potential claims stemming from the accident would be covered by re-insurance contracts.
“QBE has significant external re-insurance protections in place for claims of this nature,” the company said in the filing.
While litigation against QBE and the other insurers is likely to keep losses borne by insurers in doubt for some time, sources confirmed to BusinessDaily that the liability policy is limited to claims relating to “events above the waterline”.
If this is correct, then BP may have no recourse to insurance for any damage caused by the oil gushing from the seabed.
This is a point of legal contention that could take years to determine.
BusinessDaily has also learned that QBE and the other insurers have already paid close to $US500 million to the owner of the damaged rig, Trans Ocean.
Most of QBE’s share of the payout will be covered by re-insurance.
If, however, BP’s liability policy is deemed by the courts to be claimable, then QBE’s direct losses may rise to as much as $50 million.
This is because QBE is acting as a re-insurer to parts of the liability cover.
QBE also told the ASX that it had reviewed its claims reserves for British motor liability claims.
While Insurance Australia Group on Wednesday announced a $365 million charge to cover a blowout in the value of body injury claims in Britain, QBE believes its reserves are sufficient to meet the expected rise in claims values.
- George Lekakis
- From: Herald Sun
- June 03, 2010 9:59PM