Opinion: Main risk exposures are now cyber and natural catastrophe

Insurance capacity for the oil and gas industry is stable, despite the fact that some sectors, such as the refinery and petrochemical industries, suffered losses in 2012. Market stability could be down to a good level of competition coupled with the fact that most underwriters are looking to maintain their market share.

The same could be said about insurance capacity for terrorism-related losses and damages. The market is quite stable even after the so-called Arab Spring, although insurers are demanding more detailed information from their clients about their specific risk exposures.

The challenges for the industry, however, relate more specifically to natural catastrophes and cyber risks. As with other sectors, the oil and gas industry is susceptible to cyber attacks – but it is a greater challenge for energy firms to secure insurance in this area.

Cyber exclusion clauses – namely CL380 clauses – have been imposed across a broad range of energy insurance policies. This means that insurers are able to deny claims for physical loss or damage arising from a cyber attack.

If insurance is available, however, it is likely to simply cover areas such as malicious use of information or damage to records and data – but this type of cover does not meet the needs of the oil and gas sector. Our main risk exposure is physical damage – a fire, for example, arising from a cyber attack. The risk landscape is changing and energy firms are now just as prone to a cyber attack as any other sector; insurers and policies must adapt to reflect this.

In addition, natural catastrophe is becoming a greater concern. The past two years have seen several costly disasters. The 2011 Japanese earthquake and tsunami, the Thai floods of the same year, and 2012’s Superstorm Sandy in the US are drawing insurers’ attention to natural catastrophe cover.

However, in the oil and gas sector, it remains a challenge to secure capacity in areas where there is high exposure to these risks.

Miguel Luque Herrán, director of insurance, Repsol