The Shetland Oil Disaster: Insurers begin to calculate costs

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The Independent Online
INTERNATIONAL insurers were attempting to assess the scale of possible claims from the Braer incident yesterday which could run to hundreds of millions of pounds.

The Braer, built in 1975 in Nagasaki, Japan, at 45,000 gross tonnes, sailed as the Brae Trader and became the Braer in 1989. Its listed owner is B & H Ship Management of New York, a subsidiary of a company called Bengval and Hudner, with a base in Connecticut in the US.

According to Lloyd's of London, the leading insurer of ships and their cargoes, the insured value of the hull is dollars 12.7m ( pounds 8.5m).

Of that amount insured, 25 per cent is placed with US insurance companies and the rest with London companies including the Lloyd's market. Lloyd's reckons it faces claims of nearly dollars 4m from the damage to the hull.

The pollution protection of the company is more complicated. In common with other businesses with interests in shipping, B & H has contributed money to a 'protection and indemnity' club under the management of Skuld in Oslo.

In this way a sufficient pot of money is pooled among shipowners, with a fee paid out to a manager, so that possible payouts on large claims can be planned for. The protection and indemnity club seeks its own protection in the international reinsurance markets.

Skuld provides a standard dollars 500m-worth of coverage. The balance in excess of dollars 485m has been reinsured world-wide with a large chunk of the upper insurance protection placed at Lloyd's.

In Lloyd's yesterday the mood was relatively optimistic with underwriters mainly expressing the view that they did not expect large claims to hit the market.

The last big wave of insurance claims to hit Lloyd's arose from the Exxon Valdez disaster which took place in 1989. For the world's insurance industry that catastrophe led to losses of dollars 1.5bn.

But, in the last five years, Lloyd's has been hit by at least 14 disasters, the last being Hurricane Andrew this autumn.

In the wake of losses in the last two years of more than pounds 2.5bn and expected losses this year of pounds 1.5bn yet to be announced, some underwriters in London remained nervous about the latest catastrophe.

----------------------------------------------------------------- Natural catastrophes and major losses 1987-1991 (Insured market losses of dollars 1bn (pounds 700m) or over) ----------------------------------------------------------------- Date Place Event Estimated loss 16.10.87 N-w Europe October Windstorm dollars 5bn (pounds 3.5bn) 06.07.88 North Sea Piper Alpha Explosion dollars 1.4bn (pounds 950m) 24.03.89 Alaska Exxon Valdez dollars 1.5bn (pounds 1bn) 15.09.89 USA Hurricane Hugo dollars 5.8bn (pounds 4bn) 17.10.89 USA San Francisco Earthquake dollars 1.5bn (pounds 1bn) 23.10.89 USA Philips Petroleum Explosion dollars 1.5bn (pounds 1bn) 25.01.90 N-w Europe Windstorm 'Daria' dollars 4.6bn (pounds 3.2bn) 03.02.90 N-w Europe Windstorm 'Herta' dollars 1.3bn (pounds 900m) 25.02.90 N-w Europe Windstorm 'Vivian' dollars 3.2bn (pounds 2.25bn) 28.02.90 N-w Europe Windstorm 'Wibke' dollars 1.3bn (pounds 900m) 11.07.90 USA Colorado Storms dollars 1bn (pounds 700m) 26.09.91 Japan Typhoon 19 'Mireille' dollars 4.8bn (pounds 3.3bn) 20.10.91 USA Oakland Bush Fires dollars 2.5bn (pounds 1.7bn) -----------------------------------------------------------------

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