Oil Tanker Down – What Does This Mean For Your Insurance?
Oil spills have a huge and immediate economic, social and environmental impact. People living in the local area lose their livelihood as tourism areas and fisheries are temporarily closed for clean up purposes. The cleanup costs for an oil spillage are huge and thousands of marine animals, plants and even birds can be killed or injured. On top of all of this, the chemicals to break up the oil can be toxic and sometimes impossible to remove. Any oil that goes down with the ship can also cause problems as it can contaminate the seabed and marine organisms.
Despite the overall decrease in the number of oil tanker spillages in European waters over the period between 1990 – 2005, major spillages still occur in irregular intervals. Large oil spillages account for 10 – 15% of all oil that enters the ocean worldwide every year. When it comes to insurance, the cost will completely depend on the amount spilt, the size of the ship, animal deaths, marine death and many more factors. With that in mind in our latest blog, we take a look at the impact that oil spills can have on insurance premiums.
Insurance Rates
Every ship will need various forms of marine insurance including annual war risk cover as well as an additional breach premium when entering high-risk areas. These separate premiums are calculated to the value of the ship, or hull, for a seven day period. Now insurance for tankers is around 10 times the cost of what it was before, due to the two ships which were attacked earlier in June.
Six oil tankers and a U.S. spy drone have been attacked since May 2019 either in, or near, the Strait of Hormuz, a strategically important waterway which separates Iran, Oman and the United Arab Emirates.
Famous Oil Spillages
BP’s Deepwater Horizon Oil Spill (2010)
BP’s Deepwater Horizon Oil Spill was the largest accidental oil spill in history. In the Gulf of Mexico on April 20th 2010, a surge of natural gas blasted through a cement well cap that had recently been installed to seal a well drilled by the Deepwater Horizon oil platform, where it ignited. 11 workers were killed and 17 were injured, and the oil platform eventually capsized and sank two days later.
134 million gallons of oil was also released and about 2,100 km of the Gulf Coast from Texas to Floria was coated in oil. In the lawsuit that followed, BP paid $65 billion in compensation to people who relied on the Gulf of Mexico for their livelihoods. They also had to pay compensation to the workers for the experience.
Kuwait Oil Spill (1991)
One of the worst oil spills in history wasn’t an accident. During the Gulf War, Iraqi forces attempted to prevent American soldiers from landing by opening valves at an offshore oil terminal and dumping oil from tankers. The oil resulted in a 4-inch thick oil slick that spread across 4,000 square miles in the Persian Gulf. 380 – 520 million gallons of oil were spilt. According to UNESCO’s Intergovernmental Oceanographic Commission, the spill resulted in permanent damage to local fisheries and coral ecosystems.
The Castillo de Bellver Oil Spill (1983)
A fire aboard the oil tanker Castillo de Bellver in August 1983 was responsible for the tanker’s capsizing. When the fire broke out on August 6th, the Castillo de Bellver was located in the South Atlantic Ocean roughly 70 miles from Cape Town, South Africa. The tanker drifted and broke into two pieces; the stern section, which contained some 110,000 tons of oil drifted to within 24 miles of the coast before it sank into the water.
The front of the tanker was towed away from the coast, where engineers used explosives to sink it. Although a portion of the oil slick burned during the fire, the majority of the oil released at the surface was caught in the Benguela Current and carried out to sea before it dispersed, causing little environmental damage. It is said the tanker was carrying 79 million gallons of crude oil when the fire started.
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Marine Insurance
Marine insurance covers the loss or damage to property as a result of natural disasters like cyclone, earthquake and lightning. Man-made disasters like theft, violence, and piracy of ships are also covered, as well as collision, overturning or derailment of land conveyance.
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Types Of Marine Insurance For Oil Spillages
- Shipping insurance cover – Shipping insurance is a service whereby senders whose parcels are lost, stolen and or damaged in transit are reimbursed.
- Marine cargo insurance – Marine cargo insurance is a class of property insurance that insures property whilst in transit against loss or damage arising from perils associated with the navigation of the sea.
- Hull and associated risks insurance – Cover is available for both blue and green water ship operators for damage to hull and machinery, including total loss of the vessel.
- Public liability insurance – provides protection if your business activities kill or injure a member of the public or damage their property.
- Employers liability insurance – This is a legal requirement if you employ any member of staff (including permanent, temporary, contractors or freelancers). The minimum level of protection is £5m, which will cover the cost of compensation claims if they get injured or ill at work.
- Business interruption insurance – Provides cover for financial losses if your business can’t operate from its premises as normal as a result of a fire, major theft or a flood.
- Commercial buildings & contents insurance – Provides cover for your business premises in the event of flooding, a fire or theft.
- Business assets insurance – Provides cover for the things that your business needs to operate, such as computers, mechanical equipment, tools, machines and stock.
Oil spillages can have dangerous consequences for society; economically, environmentally and socially. As a result, oil spill accidents attract intense media attraction and political uproar. It is therefore extremely important for marine businesses to have insurance to cover disasters such as these, as the outcome can be devastating for a lot of people, animals and the environment.
[broker_name] understands the risk and unpredictability of transporting goods by sea and, therefore we will work with you and your business to find marine insurance quotes which will best suit your requirements. To find out more, contact [broker_director] today by calling [broker_phone].
