Ricardo Robles
Managing Director
AMMIS
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View from the Top

Insurance Broker Helps Companies Rest Assured

Wed, 01/21/2015 - 17:20

Q: What made an insurance company with British roots decide to set up base in Mexico?

A: Our chairman arrived to Mexico from London in the 1990s, having been a marine insurance practitioner at Lloyd’s beforehand. Shortly after his arrival, he recognized the potential growth of the Mexican marine industry and the shortage of local marine insurance expertise. It quickly became apparent to him that a vast array of specialist insurance products were not readily accessible to the Mexican marine and offshore energy industry. Besides, foreign companies working in Mexico needed assistance with the country’s insurance rules, laws, and regulations. This led to the creation of AMMIS, which therefore is a Mexican insurance broker founded by a British man.

Q: Are risk management advisory services commonly sought after in the Mexican oil and gas industry?

A: We are not risk managers. International marine operators tend to have their own risk management teams while Mexican companies are beginning to follow suit. What we do is to advise those teams, or other responsible parties, on the risk transfer products available to them in the insurance market. Naturally, we need to understand their exposure as well as their legal and contractual requirements while we work closely with the assured’s risk, financial, and operational managers. We can bring to the table our knowledge of insurance products and our experience with placements and claims.

Q: How have PEMEX’s requirements for insurance and bonds changed with the restructuring of its procurement division?

A: The important issue here is not what PEMEX’s requirements are, but rather how the risk has changed. While contractual requirements have remained largely unchanged, the offshore market in Mexico has grown significantly over the last 10 to 15 years, which has impacted the risk exposure of all those working in these projects. There are simply more vessels and more platforms in operational areas, the vessels involved are larger and more sophisticated, while the fields and surrounding areas are more congested. In the past, contractors insured themselves based on their contractual requirements and not necessarily against their actual exposure. Given the liability regime in Mexico, this is very important to understand. Essentially, Mexico has a strict liability system, best described as “you break it, you pay for it,” which it is not possible to limit under the law. Insurance for liability should therefore be an upmost priority for contractors, especially for physical damage, such as Hull & Machinery. Contractors must ensure they have adequate cover for all their legal liabilities, including environmental ones, as opposed to only considering what is required by their contracts. Property losses are a quantifiable loss, limited to the value of the insured property. On the other hand, liability losses are virtually impossible to quantify in terms of probable maximum loss and limits of cover available.

Q: How does AMMIS determine an oil and gas project’s risk profile and which insurers would provide the best fit?

A: As a broker, we gather the relevant risk information from our clients, analyze it, and select the insurers that we feel will have the capacity and appetite for the risk. Then, they can decide whether to participate or not. The format and content of the information that we present will determine whether and how they will participate. Most risks are insurable if the correct information is provided. It is the duty of the client to provide all the material information at their disposal and enable a prudent underwriter to make an adequate assessment of the risk. Failure to comply with this duty can render the insurance null and void. Similarly, failure to disclose all material facts provides an insurer with an absolute defense if a claim is made.

Q: As the insurance market in Mexico becomes more crowded, how can AMMIS maintain the competitive costs it offers its customers?

A: The type of transactions we participate in, by law, require a chain of participants, each contributing their own expertise and expense. Most offshore energy and marine risks are not retained by Mexican insurance companies but are transferred, by way of reinsurance, to international reinsurance markets. This creates a system that produces a lengthy chain of intermediaries and consequential costs. We insist that our insurance providers maintain a strict control of intermediary costs and that they maintain the highest possible level of transparency throughout the chain.