CASE STUDY 2: COMBINING
LEGAL, RISK MANAGEMENT AND INSURANCE EXPERTISE.
PROBLEM An oil company owned petroleum terminals in California and in the Philippines. To transport their products around the world, they owned several oil tankers and chartered space in others. Their insurance program was in costly non-compliance with Philippines insurance regulations and U.S. oil spill laws. Overall, the insurance program was priced above market rates, and gave them dangerously inadequate coverage.
ACTION We were called in to
consult and rectify the situation. We advised the client that, besides having
to comply with the federal financial responsibility requirements
under Oil Pollution Act of 1990 (OPA '90) regulations, oil
companies operating in California and along its coast or
within state waters also had to comply with California's
version of OPA 90, the California Oil Spill Response Act
(OSPRA). We had previously helped draft California's insurance
requirements under this Act, and were aware of similar versions
enacted in most other coastal states. Our analysis of their
contracts led to recommendations to rewrite their storage
and transportation agreements. This transferred some of
the risk to their contract-partners and reduced their exposures
to liability and property damage.
Finally, we arranged for an insurance company licensed to transact business in
the Philippines to write a "fronting" policy, which was
then reinsured by the London insurance market, allowing the
local carrier to avoid all under- writing exposure while
complying with local requirements.
SOLUTION We tailored the com-pany's insurance program to
comply with U.S. and local Phillippines regulations. Re-categorizing the risks resulted in a complete re-rating of the liability and cargo policies which, in turn, meant substantial reductions in insurance costs. Finally, following our advice, they became members in a Protection & Indemnity Club,
which gave them comprehensive coverage for their liability risks of marine oil spills |
