Advertisement feature: This article is provided by Oil Insurance Limited (OIL) and includes details of OIL’s position in the market. This is provided for information purposes only.
2020 was a year that changed the world forever in a multitude of ways. One requires no explanation of the global damage COVID-19 inflicted; however, Oil Insurance Limited (OIL) continued to deliver the long-term stable benefits the members have grown accustomed to while elements of the commercial market were anything but steady. The pandemic also negatively affected the way commercial insurance policies were renewed, negotiated, priced and worded from a buyer’s perspective, in addition to an already hardening underlying energy insurance market. In contrast, OIL weathered the COVID-19 turmoil with minimal disruption and continued to operate uninterrupted delivering value to our members. OIL policies automatically renewed, limits remained the same, coverage remained broad, deductibles were left unchanged and pricing remained stable.
For the year, OIL welcomed five new members: United Refining Co., Pembina Pipeline Corp., Ecopetrol S.A., Federated Co-Operatives Ltd., and Inter Pipeline Ltd. All five companies are located in the Americas – one in the USA, three in Canada and one in Colombia. This was the largest number of companies joining OIL in a single year since 2003; no members departed, and membership now stands at 60 companies after two members acquired two additional members. It is also important to note that several other energy companies sought OIL membership but did not meet OIL’s current eligibility requirements. Overall, there is no doubt that global interest in OIL is growing. In some respects, the dynamics in today’s energy insurance market are not unlike the late 1960s and early 1970s, when markets withdrew coverages and capacity from the sector - leading to OIL’s formation.
Financially, the company once again posted strong earnings results with Net Income coming in at US$467 million for the year. Return on invested assets was 7.4% and drove Net Investment Income of US$420 million while Net Underwriting Income contributed US$67 million. Expenses remained flat at US$20 million and the company paid US$200 million in dividends to its shareholders late in the year. Over the past seven years, OIL has returned US$2.25 billion to its shareholders via dividends, which equates to 94% of OIL’s Net Income and 73% of Written Premium over that same period.
Perhaps the most important news is OIL’s current development of its next 5-year strategic plan. With the energy industry in transition, OIL is preparing itself for our members’ future insurance needs. Our Advisory Panel provided us with input in the fall of 2020; our members completed a survey in early 2021 and now the Board will deliberate over and determine our new strategic direction by the end of 2021.
Without doubt, OIL’s most important strategic advantage it has over other energy insurance providers is its complete lack of reliance on outside capital and reinsurance. Collectively and intrinsically, our members provide over US$2 trillion of capital support to OIL, based upon how the mutual system works. This enables it to chart its own path through the maze of ESG pressures organizations are experiencing around the world. We intend to provide both traditional oil & gas - as well as renewable/new energy technologies companies - with the ability to insure their operations, irrespective of their strategic direction. OIL is there to support our members and prospects based upon their internal decision-making, not the directions set by others.
Each company has its own view of what the future looks like and how their company will participate in that future. Our job is to see to it that they can make decisions based upon rational criteria versus politically driven thresholds. “The Road Ahead – Making the Journey Together” is OIL’s 2020 annual report theme; it could be the theme of the 5-year strategic plan as well.
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 coverages. Should your company have an interest in learning more about OIL, please contact your local WTW representative or Paul Braddock on: paul.braddock@willistowerswatson.com
George Hutchings is SVP & COO of Oil Insurance Limited and based in Bermuda.
