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  • Print publication year: 2016
  • Online publication date: October 2016

4 - Pooling Mechanisms for Offshore Liability

Summary

Earlier discussion has shown that offshore accidents have the potential to cause substantial damage and corresponding liability claims. How liability of a catastrophic scale could be covered creates a big challenge for the offshore facilities. This chapter focuses on risk-pooling mechanisms for damage compensation following an offshore accident. Various approaches are taken to pooling. First, the theoretical basis for pooling will be sketched as well as the differences with insurance (4.1). Next, attention will be paid to the Offshore Pollution Liability Agreement (OPOL), which came into effect on 1 May 1975 and is specifically focused on offshore pollution (4.2). Then attention will be paid to two pooling mechanisms for offshore-related damage, Oil Insurance Limited. (OIL) and Oil Casualty Insurance, Ltd. (OCIL) (4.3). We have already discussed civil liability and fund conventions. Compensation for vessel-based pollution is largely realized via the Protection and Indemnity (P&I) Clubs, which are equally based on risk pooling and therefore deserve a discussion (4.4). Next, tention will be paid to risk-pooling schemes in other high-risk sectors. In this respect, the focus will be especially on risk pooling in the nuclear sector (4.5). The failure of large pooling mechanisms in the nuclear sector also provides important lessons for the offshore industry. Some concluding observations finish the chapter (4.6).

In this chapter, existing pooling mechanisms for offshore liability will be discussed. However, this chapter does not yet address the extent to which these pooling mechanisms are used effectively to cover liability following a major offshore accident. The coverage of liability in practice will be dealt with in Chapter 5. Overlap will, however, as far as possible be avoided by sketching how the various pooling mechanisms work in this chapter; Chapter 5 will address the extent to which the particular mechanisms are used in practise. In this respect, the results of interviews with stakeholders also will be taken into account.

From the outset, it is worth mentioning that a large number of insurance and re-insurance pools do exist. Recently, a study has been commissioned by the European Commission concerning co-insurance/re-insurance pools. The study identified fifty-one pools, many of which focus on catastrophic risk (e.g. nuclear, environmental, terrorism).

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