This chapter will take a forward-looking approach by examining what the potential is of various insurance- and financial market–based instruments to provide coverage for damage caused by offshore installations. Different from Chapter 5, which discussed the status quo of the available financial cover, this chapter is rather forward looking and hence analyzes the potential of insurance and other financial instruments to provide cover for a potential future liability regime. To some extent, this chapter is therefore unavoidably speculative. It is based on opinions of experts on what amounts would be insurable in a European market and the literature on financial security instruments in other markets. Hence, the question that will mainly be asked is to what extent a liability and compensation scheme could be covered by insurance and financial instruments. In order to make such an assessment, it may be interesting not only to focus on the offshore liability sector but also to compare with other sectors. An obvious option is to look at amounts available for vessel-based pollution. Also, developments as far as nuclear liability is concerned are interesting to consider.
This chapter will first provide an estimate of the potential costs of a major incident with an offshore installation. These estimates will be based not only on an analysis of past events but also on evidence provided by experts from both the oil and gas and insurance industries. The experience with similar accidents in the vessel-based pollution area will be included as well.
If indeed one wishes to examine the adequacy of particular financial or insurance instruments to cover liabilities, one should at least have some idea of the potential costs of an offshore incident (6.1). Next, a proposal to cover potential catastrophes by self-guarantee is discussed (6.2). Another approach is to broaden the capacity of insurance and (re-)insurance and to cover liability caused by offshore incidents. In this section, a comparison with the coverage in other high-risk sectors will also be provided, in particular, vessel-induced oil pollution and nuclear damage. Attention will also be paid to the potential of regional or international risk pooling (6.3).