Graciela Álvarez Hoth
NRGI Broker

Best Practices in Insurance Shape the New Oil Industry

Wed, 01/20/2016 - 09:19

The country is developing in a new direction, so it only makes sense for companies to align themselves with this new phase. This was exactly the motivation behind Grupo Vitesse’s decision to create a specialized Energy Insurance Broker "NRGI Broker." With over 25 years of acquired experience from PEMEX’s marine operations, the company has now chosen to reinvent itself in line with the new trends in onshore production and gas pipelines.

The experience present in NRGI Broker dates back to the days when Cantarell was booming and the company has contributed in an active way by attracting international market leaders to the country.

The importance of a guide to help companies comply with the new Mexican procedures implemented by the Energy Reform is often overlooked, according to Graciela Álvarez Hoth, the company’s CEO. She explains that, before the reforms, PEMEX provided its contractors with wide coverages, so their only concern was the deductible, and as a result, clients became accustomed to the buffer that PEMEX represented. “Now, most of the companies are no longer contractors and have become operators, and naturally they need a broader experience in negotiating administrative hurdles with the authorities,” Álvarez explains.

NRGI Broker takes a proactive approach to the new regulations, allocating time to dialogues with risk managers to discuss the new market rules that will be launched, even if these have not yet been released. “Over the past year we have closely worked with the regulatory agencies in order to participate in the processes of issuing regulations that are new to the country,” Álvarez Hoth asserts. By becoming part of this group, she is confident that NRGI Broker can provide clients with integral and adequate solutions. “In this way, we can inform the regulators of global trends, and analyze how we can apply this information to Mexican laws and norms,” she suggests.

Accidents are unavoidable, but despite the fact that this constitutes a core part of NRGI Broker’s business, the company takes measures to mitigate risks. “When the insurance sector works with the regulatory agency as a team, everyone’s experiences are enriched because every participant has something to offer,” expresses Álvarez Hoth. Guidelines are currently being established that will require operators to conform to certain security regulations involving studies that have to be carried out before initiating production, with the objective of ensuring production is as safe as possible.

“Due to the low oil price, the insurance sector is working in a soft market where there is plenty of capacity and few players due to companies that are unwilling to lose money having shut down their activities, which has generated an appetite and a surplus that has not been seen in the last 15 years,” Álvarez Hoth continues. This will allow new operators in Mexico access to a wide variety of coverage at extremely competitive prices.

Providing insurance for new deepwater projects will not be without its challenges, assures Álvarez Hoth, but she does not expect these to overwhelm NRGI Broker. “At the end of the day, insurance companies are more worried about onshore platforms than offshore platforms because onshore activity in Mexican territory entails various factors that can affect operations,” she points out. Dealing with social aspects is difficult and the onshore segment will require a gradual learning process because operations will vary greatly across regions. On the other hand, offshore operations are identical all over the world, and although some regions like the North Sea present higher risks due to the tides. From this perspective, the Gulf of Mexico presents relatively low risks. Deepwater operations are relatively expensive but the players are also bigger, and Álvarez Hoth predicts that companies like Shell and Exxon will enter the market when it makes sense for them from a financial perspective. “These operators will enter with international sophistication and experience from working in places with varying levels of infrastructure,” according to Álvarez Hoth. “The goal is to keep track of the country’s obstacles while keeping in mind that these types of situations have already been encountered in other parts of the world.”

Due to NRGI Broker’s breadth of experience in helping companies enter new markets, Álvarez Hoth believes that the company is uniquely positioned to welcome new players that will be attracted by the Energy Reforms. “NRGI Broker can offer these players an advisor that can speak their language and that deeply understand the country, including its laws and regulations in insurance and surety topics,” she argues.