A challenging year
2018 - a challenging year During 2018, OIL financial performance did not produce the same strong results of the last ten years. After several years of below average/expected losses, OIL sustained Losses & Loss Expenses of US$783 million against Premiums Written of US$379 million1. After combining these results with Net Investment Losses of US$251 million, the Net Income Loss for the year was US$676 million. The last time OIL sustained this level of insured losses dates back to 2008. This time period is consistent with OIL’s modelled results which forecasts losses of this magnitude to occur statistically once every eight years or approximately 12% of the time. While OIL’s GAAP Losses & Loss Expenses totaled US$783 million, actual case reserves were US$911 million with Loss Expenses of US$4 million and a net downward IBNR adjustment of US$132 million. Refining losses made up a significant portion of the total case reserves for the year.
US$450 million dividend for 2018 Earlier in the year, OIL declared and paid a US$450 million dividend to its Shareholders. In doing so, OIL has paid dividends totaling US$1.8 billion since 2013 and billed US$2.1 billion in premiums over that same period. The recent distribution was made possible by OIL’s continued and very strong financial position that allows it to absorb a bad loss year without materially or negatively affecting its financial strength. This was acknowledged by Standard & Poor’s when it upgraded OIL’s rating from A- Stable to A Stable in 2018.
OIL welcomes Braskem In addition to its financial performance, OIL welcomed Braskem SA, a global petrochemical company, from Sao Paulo, Brazil as it newest member with no members electing to leave the mutual. Braskem is OIL’s first ever South American member. Marathon Petroleum Corporation acquired Andeavor (both OIL members) to become the US’ largest crude oil refinery processing over 3 million barrels per day. As a result of this shareholder activity, the total number of shareholders remained constant at 54 with total insured assets growing to over US$3 trillion.
US$400 million limit sustained Lastly, OIL analyzed the merits of increasing its US$400 million per occurrence limit in 2018 and concluded that, while it financially was in a position to increase its product offering, it was best to revisit this topic in 2019.
Prospects for 2019 Looking forward to 2019, OIL is expected to deliver its first set of data analytics to its membership at the company’s March 2019 AGM. Willis Towers Watson has helped play a role in shaping what that information looks like and has shared loss information with OIL from WELD (Willis Energy Loss Database) to supplement OIL’s already significant 46 years of loss data compiled since its formation. In the past, OIL historically shared specific and unfiltered loss information with its members, but due to anti-trust concerns stopped doing so in the early 2000s. This new initiative goes back to that concept, but this time individual loss occurrence information is replaced by anonymous robust comparative information that will help shareholders better understand how they are performing in the mutual relative to all other shareholders.
George Hutchings is SVP & COO of Oil Insurance Limited and based in Bermuda.
OIL is a Bermuda based energy mutual that offers its members up to US$400 million in net property, control of well and sudden & accidental 3rd party pollution coverage. Should your company have an interest in learning more about OIL, please contact your local Willis Towers Watson representative or Joe Seeger, EVP & MD on Joe.Seeger@WillisTowersWatson.com.
1 All data contained within this article is sourced from Oil Insurance Limited