Only some carriers have what it takes to address the complex, potentially catastrophic risks of the energy industry. Answers to the following five questions can help you zero in on insurers that are up for the task now--and for the long term.
1. What is the carrier's financial performance? Financial strength ratings are key indicators of stability, but look deeper for additional insight. Examine the overall financial performance of any prospective carrier and its parent company. A stable carrier will demonstrate solid financial performance, including return on equity that is consistently on par or above that of its peers.
2. Is the carrier consistent? To find a carrier that will be with you for the long term, assess whether the carrier is consistent in both its commitment and approach to energy risks. Look for continuity in lines of business underwritten, risk selection, capacity levels and pricing. These are the hallmarks of underwriting integrity--and the polar opposite of opportunistic underwriting, which should be avoided at all costs. After all, why pay a premium that is 20 percent less than the next lowest bidder this year if it will be 40 percent higher next year?
3. How well does the carrier know your business? If a carrier has years of experience writing risks in your industry segment--whether you're in oil refineries, offshore rigs, power generation or another energy sector--it knows how to underwrite and price risk in a way that will protect you and be sustainable.
4. Does the carrier's reputation precede it? When you know a carrier's insurance professionals are specialists in both energy risks and insurance, you will have a level of comfort and trust going into your transaction that while intangible is yet invaluable. Insurance professionals who are truly "plugged in" to your industry ask the right questions and have obvious technical expertise. There is no learning curve to overcome, so your carrier's service and underwriting begin at a higher level--and will elevate quickly from there, resulting in solutions that are more meaningful.
5. Are the carrier's services truly valuable to you? If your operation is international, as most energy operations are, you can benefit from an insurer with international service capabilities as well. Such an insurer can provide everything from advice on emerging-markets exposures to insights on the litigation environment of various locales. Also pivotal is claims service that anticipates roadblocks to fast recovery and plots to overcome them before a loss occurs--rather than the traditional approach of waiting until obstacles present themselves and then dealing with ways to get around them.
With the right answers to these questions, you can be prepared to embark on a long-term and satisfying relationship with a carrier that is willing and able to handle your complex energy risks.
ROBERT T. PULKA, Senior Vice President, Onshore Property, Zurich Global Energy
November 1, 2005
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