Tag Archives: Deepwater Horizon

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Risk Link Roundup

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These topical articles highlight some interesting and relevant issues in the world of risk and insurance; from how Uber could impact the insurance industry, to Deepwater Horizon lessons-learned, to supporting workers with chronic conditions to board integrity.

What Will Be the Uber of Insurance?

From Insurance Thought Leadership: Insurance is ripe for disruption, and, given the conservative nature of the reigning carriers and large brokers, it is a fair guess that a lot of innovation will come from outside the industry. There are a few of candidates that might be in the winner’s circle when the dust settles.

Gard: Six Takeaways from Deepwater Horizon

From Marine Log: P&I club Gard estimates that BP’s claims and costs from the Deepwater Horizon disaster are more than $70 billion. Gard lists six important lessons emerging from the 2010 incident and the ensuing litigation during the past five years.

Employers Urged to Accommodate Workers’ Chronic Conditions

From Business Insurance: When it comes to workers with chronic conditions, employers should focus on providing accommodations and support rather than managing a disease, an expert said during the Disability Management Employer Coalition’s 2015 conference in San Francisco.

Integrity? The Buck Stops at the Board

From Listed Magazine: Companies are quick to blame “rogue employees” when they experience an ethical failure within. But employees merely reflect a company’s true and actual culture, internal controls and practices—all of which point right back to the board

Turtles Killed by the BP Oil Spill

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We have covered the BP oil spill extensively over the past two years.

For companies it was one of the most dramatic lessons in the dangers of excessive risk taking and showed just how much damage can be done — to a reputation, the environment and the families of those who died in the explosion — when a company displays a “pattern of neglect and corner cutting.” We’ve looked at the risk management lessons of the spill, the events leading up to the Deepwater Horizon explosion, how the rig’s blowout preventer failed, and how conflicts of interest hinder offshore drilling regulation.

Now — after a Greenpeace Freedom of Information Act request has finally uncovered some previously unreleased images — we look at the heart-breaking ecological damage of the spill.

Here is what is presumably a government worker cleaning up some of the dead animals that were killed by the oil that filled the Gulf of Mexico. Mother Jones has a gallery of many more explicit photos showing just how badly some endangered sea turtles were covered in crude.

Lunch with William R. Berkley

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I was fortunate enough to attend the W. R. Berkley Corporation’s annual luncheon yesterday at the Red Eye Grill here in Midtown Manhattan. Bill Berkley, chairman and CEO of W.R. Berkley Corp., is known for not only his intelligence and success within the insurance industry, but also for his blunt remarks and honest opinions — listening to him speak is exciting and interesting.

As one would imagine, talk of the Deepwater Horizon incident and the insurance implications surrounding it emerged. Berkley, one of the many insurers of Transocean, said his company lost $5 million from the offshore accident, but that number is far from what Llyod’s, Excel and ACE lost. Berkley, however, was not upset at the relatively small chunk of change his company lost. Rather, he was excited that his firm, for the first time, was able to raise prices 40 to 50% for offshore insurance — calling the Gulf of Mexico disaster both very unfortunate and an opportunity for insurers.

I asked Mr. Berkley if he perceived the Deepwater Horizon incident as an enormous lack of risk management. He reponded:

“I don’t think it’s an enormous lack of risk management in the offshore drilling industry, no. I think it was more a lack of understanding of all the alternative things that could go wrong.”

The very definition of risk management is to identify and assess any and all risks of an operation and then work to minimize, monitor and control the probability and/or impact of unfortunate events. Maybe I’m crazy, but the Deepwater Horizon catastrophe seems like an enormous lack of risk management to me.

The topic of discussion soon turned to the topic of financial regulation, to which Berkley agrees is needed. But he also wonders what other aren’t asking:

“If all these giant financial institutions are taking on such great risks, how come they have such crummy returns? No one is asking that.”

Indeed, I have not heard anyone asking that question.

Then questions about the P/C market prices arose. He was asked why he saw prices starting to firm up and he answered:

“You can only hide from reality for a certain length of time. You’re going to see some people go broke because they’ve mispriced their business. They won’t survive through the good times, maybe not even through the first quarter of 2011.

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People are accumulating adverse reserve deficits and that will affect them soon.

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And when asked how he would grade the government’s involvement with AIG, Berkley confidently responded, “D,” citing that “part of the problem with government is that process becomes more important than outcome.

True words indeed from a well-respected figure in the insurance industry.

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Even if I do disagree with him about the failure of risk management in regards to the Deepwater Horizon situation, he is a wise man that has proven his knowledge of the industry with the success of his own company.