By Juan Jose de la Colina
In recent times, Oil and Gas Companies have faced an uncertain backdrop with more risks to handle than ever. Firstly, the decline in crude oil prices has forced companies to cut costs in order to adapt to the new reality. This adaptation has focused on specific lines, momentarily sidelining investment plans or those already being implemented. The disappearance of some organizations and sales and mergers have made news headlines. Another key issue is the decommissioning of certain assets at the end of their life cycle.
The international expansion and exploration of more complex zones has entailed rapidly evolving technical risks which need to be handled by the sector. At the same time, local regulation and environmental protection policies have required the industry to engage in a significant process of adaptation and refinement. New exploration methods such as fracking have had an impact, and aside from environmental considerations, have brought about geopolitical change in terms of oil dependency and positioning in relation to reserves. CO2 emissions and global environmental policies have led to the emergence of a new reputational risk, bringing with it an associated need for investment.
For a sector which has traditionally focused on its main activity, diversifying to find investments and develop cleaner energy and technology has created an additional challenge for our clients.
Political risks and natural hazards have evolved in recent years. CBI covers have become widespread, forcing the industry to reconsider its position on them. Meanwhile political events and associated uncertainties have become reality in some areas with a major impact on the sector’s results.
The sophistication of new technology and big data in the form of large databases and analysis of massive volumes of information, have unearthed and magnified cyber risks. In recent years, these risks have raised alarms in the sector and in general across all areas. The solutions provided by the insurance industry to date have failed to meet the needs of clients faced with increasingly sophisticated and high impact threats in terms of the scale of potential losses. This has forced them to seek more complex, limited solutions, defined considering the difficulty in controlling the pooling that can be applied at present for these types of risks.
The need to retrain employees to handle all these challenges in a continually evolving and changing sector, together with the current economic strain in the industry, has made talent retention and knowledge transfer another significant challenge to address. Large Oil & Gas corporations need the insurance industry to deliver efficient management of their risks, capable of addressing the impact of their activities and able to anticipate and control security and environmental risks to which they are exposed in their activities.
A key factor is having specialized teams in place to provide an appropriate response. MGR has an excellent multinational team of specialized Engineers and Underwriters with expertise in their economic sectors, enabling them to tailor all our products and services to client needs.
Developing a close relationship with our clients also means offering them a high quality “after sales” service, both in issuing documentation as well as when the risk materializes at the time of the claim. At MGR we seek to ensure the specialization of our teams matches the activities carried out by our clients. Given the sophistication of the insurance programs of the companies which make up our portfolio, we also have a team providing service to captives with a significant presence in the sector, aimed at providing the most appropriate response to their needs.