2019 proved to be Oil Insurance Limited’s (OIL) second best operational and financial year of performance since its inception in 1972; only 2009 was better. Four new members joined OIL: Beach Energy and Origin Energy from Australia, Motiva Enterprises from the United States and Bruce Power from Canada. In addition, Net Income exceeded $1 billion, on the back of strong underwriting and investment results.
While these results nearly set a record, OIL’s steadfast and dedicated objective to offer a $400 million per occurrence limit at a long-term cost-effective price stands out as a value proposition differentiator relative to the commercial markets. At a time when there are significant adverse pricing and capacity pressures in the energy insurance markets, OIL continues to be unaffected by these external forces because of its unique mutual system. Furthermore and because of its ownership base that directly supports its internally generated capital position, OIL is firmly dedicated to supporting the energy industry, which includes the Exploration & Production, Refining & Marketing/Chemicals, Pipeline, Power/Utility, Wind & Solar Renewables and Mining sectors.
As a result, OIL continues to remain critically important to its members and it is a very real and viable insurance option for interested and qualified energy company prospects. Over the past several months, Willis Towers Watson has experienced an elevated level of interest from energy companies attempting to understand the benefits and the long-term commitment of becoming an OIL member.
On the product development front, OIL teamed up with Brit Insurance and Oil Casualty Insurance Limited (OCIL) to co-develop the “OIL Cyber Wrap”. Realizing that there were gaps in cyber coverage with traditional OIL Property/Business Interruption wraps, the three companies collaborated to develop $100 million of additional Cyber Property/Business Interruption coverage that works seamlessly with OIL’s existing cyber property coverage. Brit Insurance exclusively offers the product with OCIL as a following market.
The 2019 financial results were a combination of an excellent underwriting year with a similarly good investment year. The underwriting year saw Premiums Written of $478 million against Losses & Loss Expenses of $112 million, yielding Underwriting Income of $364 million. As a point of reference, OIL’s actuarially derived Annual Expected Losses have averaged around $600 million for the past several years. Once Net Investment Income of $691 million is combined with underwriting results and administrative costs, OIL’s Net Income totaled $1.034 billion for the year.
Earlier in the year, OIL declared and paid a $250 million dividend to its Shareholders. In doing so, OIL has paid dividends totaling $2.1 billion since 2013 and billed $2.6 billion in premiums over that same period. The recent distribution was made possible by OIL’s continued and very strong financial position as reflected by Standard & Poor’s rating of A Stable and Moody’s rating of A2.
As previously mentioned, OIL welcomed four new members to the mutual with no members departing. After taking into consideration Occidental Petroleum’s acquisition of Anadarko Petroleum (both of whom are OIL members), OIL’s shareholder count increased from 54 to 57 over the year. The membership increase boosted worldwide insured assets by $43 billion to an aggregate total of $3.1 trillion. OIL is a Bermuda based energy mutual that offers its members up to $400 million in net property, control of well and sudden & accidental 3rd party pollution coverages. 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.
George Hutchings is SVP & COO of Oil Insurance Limited and based in Bermuda.
