Peter Hall, head of sea freight and logistics at Lockton, warned that soaring oil and gas prices following international sanctions against Russia could increase the risk of underinsurance.
Commenting on the dispute and its implications for the global re/insurance industry, Hall noted that failure to review and purchase a sufficient limit could leave some in the energy sector underinsured as asset values exceed insurance limits.
“With spot market crude oil prices above $100 for many weeks now – and at some point the highest levels since 2008 – insurance policy limits need to be constantly reviewed to ensure that full value coverage remains in place,” Hall said.
“Many companies in the industry should be encouraged to consider whether an increase in their primary policy is necessary or at least ensure that their policy is on a first loss basis.”
The British government’s recently released energy security strategy aims to reduce dependence on Russian oil and will have a major impact on the global economy, Lockton believes, with prices likely to rise further on oil and gas supplies.
“Companies affected include those that produce and transport crude oil, oil and gas derivatives as well as those that offer storage facilities,” Hall said.
“Companies, in particular, need to be aware of the risks this oil and gas price spike poses – primarily in terms of underinsurance of their assets,” he explained. “Affected companies should first review the coverage terms of their policies to identify any potential underinsurance.”
The Lockton executive also advised companies to seek to introduce measures to reduce their exposure to risk while seeking to increase the limits insured with their incumbent insurer.