Know Before You Go: High Risk O&G Targets Must Ensure Their Policies Work

by Deon Daugherty, Senior Editor

As if the oil and gas industry needed another thing to worry about, social unrest and political violence around the globe is threatening the nuanced insurance market for oil and gas companies that operate in risky parts of the world.

On the heels of France launching air strikes on ISIS controlled oil fields, I talked with Smita Malik, vice president of programs and special risks at Clements Worldwide in Washington, D.C., about the complications of liability in war-torn nations.

It’s not as simple as buying a “terrorism” policy, she said. Policies can differ from country to country, and in some instances, a kidnapping or bombing in a civil war might not be covered. Conversely, a policy that does cover kidnapping might not cover a terrorist event, she said.

“What’s going on around the world is not simply terrorism,” Malik said. “There could be riots and civil unrest following elections. In Iraq and Afghanistan, there is a broad range of peril.”

In 2013, dozens of workers as a gas plant were held hostage and subsequently killed in an Al Qaeda attack. More recently, militants in Nigeria seized a Shell oil rig with 99 hostages, and ISIS has taken hostages on several occasions in Libya.

Insurance coverage varies from country to country and oil and gas managers need to be mindful of the local rules. A specialist broker should have a level of experience in the given market.

Most major oil and gas companies tightly control the security of their assets, but they also have to make sure their subcontractors and vendors do likewise.

As Malik said, “You don’t want a lapse with a subcontractor [coverage] because it exposes the whole facility.”

Companies should know what their insurance covers and exactly what they’re buying.

“In Africa, there is a different political environment than Iraq or other countries, and the important thing is when you go into a country or look at vendors and community support organizations, you should know the risk of that country. Know [insurance policies] is not a standard that you can copy and paste, believing a good policy in one country works in another one,” she said.

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