The explosion and fire which ripped through the world’s largest oil rig, killing 10 workers, and eventually causing the structure to sink in 3000 feet of water off the coast of Brazil, could not have occurred at a worse time for Petrobas, the Brazilian state oil company which owned the rig. March 31st is the expiration date for its insurance contracts with the 16 companies who insured the loss, and so far none of them have submitted any firm proposals to renew their coverage.
According to reports, most of the $500 million insured loss will fall on a number of Lloyd’s syndicates who wrote reinsurance coverage on the rig. Reuters News Agency quoted a spokeswoman for IRB Brasil Re, who is acting as an intermediary for Petrobas, as saying, “Due to the big accident that occurred, international reinsurance firms felt the need to reevaluate the price.”
Although some quotes had been received prior to the accident, they were subsequently withdrawn. Petrobas’ situation is not helped by its past record. 81 workers have died over the last three years in various accidents, and two major oil spills last year resulted in substantial damage to the environment.
Given the current hardening of reinsurance rates generally and Petrobas’ recent loss experience, it can expect to pay a substantial premium for any coverage it obtains.
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