Cathrine-Duffey,-XL speaks with Catherine Duffy, an SVP with XL Insurance (Bermuda), during the IRMI Energy Risk and Insurance Conference about emerging risks in the oil and gas industry.

According to Ms. Duffy, the greatest threats to oil and gas companies “stem from the decrease in oil prices…which is creating talent scarcity and talent retention issues.“ The energy industry is letting go of employees that “should not have been there in the first place.” The insurance industry is concerned about what happens when oil prices start to increase. “Will there be a gap between those that can do, and those that can’t?” There is also concern about the shift from “economic power” to “geopolitical power”, and what happens when energy companies go to areas that are not friendly to companies or workers.

With the increase in technology, underwriters now work more closely with other departments than in the past. Risk engineers are consulted to help underwriters determine what it means to drill in deep water; the legal department is consulted about the implications of companies operating in less friendly countries; the claims department helps determine where future claims may appear; the emerging risk departments look at issues such as ‘crude by rail’ and Fracking.

Ms. Duffy also discussed trends in risk transfer within the energy industry. “…companies are now looking at increasing their retentions so they will have more money to buy more limits at the top… buying for catastrophe reasons.” And with the addition of alternative capital in the marketplace, “traditional insurance is being siphoned off into side cars where you have more trend-able data.”

“Risk managers can never buy enough insurance.” Ms. Duffy says that with all the changes in the industry…new technologies…new practices, there is never enough insurance. “Even with the best risk management, what you are insuring against is human error. And there is never a solution to human error.”

For more from the IRMI Energy Risk and Insurance Conference, visit the IRMI website, or the On Demand Library

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