Strategic Advisors for Insurance OffshoreTue, 01/22/2013 - 18:00
The risks present in offshore operations in the oil and gas industry have historically compelled companies to obtain insurance and financial guarantees. This is no different in the Mexican market, where offshore projects represent an important part of Pemex’s investment budget. Working with Pemex means that insurance policies have to be signed in Mexico and all contract terms have to be based on Mexican law.
This is where the expertise of companies such as Grupo Vitesse, a Mexican strategic consultancy specialized in insurance and surety bonds, and Gard, the world’s second largest marine insurer, comes into play. “Whenever you work with Pemex, you need to have sufficient guarantees that validate your operation and the ability to continue working even when an incident happens,” says Graciela Álvarez Hoth, CEO of Grupo Vitesse.
“Foreign companies have always been present in Mexico, but given the lack of knowledge of governmental procedures, they frequently work in tandem with Mexican companies,” Álvarez Hoth explains. “However, the opening of the industry has brought international companies operating independently into the market.”
Norwegian marine ensurer Gard came to Mexico in response to the increased business of Norwegian vessels with Pemex. “As vessels from Norway started to do business directly with Pemex, we came here to cover them,” Tore Furnes, Senior Underwriter and Product Responsible in P&I Offshore at Gard, explains. “Then, those companies started becoming partly Mexican, either by opening subsidiaries in the country or by forming partnerships with local companies.” Gard has covered Pemex’s contractors for 10 years. “We started with a few tankers and now we guarantee many types of vessels for them,” Furnes adds. “When we first came to Mexico, it appeared that a lot of the contractors were actually uninsured, thinking that Pemex would provide for them,” Furnes recalls. “Some of them still believe this is true, while the reality is that these companies should be looking to insure themselves on their own to support the potentially huge liabilities that working with US$100 million vessels may bring.”
Furnes believes that insurance is about advice and trust, and companies need to earn that trust through experience. “Insurance is about consulting with operators and service providers about the risks they are exposed to, and the type of coverage that they need,” Furnes describes. “Our company is more than 100 years old and we have focused on offshore underwriting since the early 1970s. We are one of only three or four companies that provide insurance for rigs and we currently have 450 rigs on our books. We are also one of the few underwriters that do this on a regular basis. With all this experience, we transmit confidence and knowledge. If you are able to convey that to the market, people will listen to you and feel safe buying insurance from you.”
With deepwater challenges looming in the short-term in Mexico, insurance companies that want to participate in this segment of the market will have to be able to transmit the same trustworthiness and confirm their expertise. “The technology is different, the equipment usually more expensive and the exposure higher, but we have the know-how and suitable coverage for such exposure,” says Furnes. “We have experience covering this type of risk, and are already covering a substantial number of contractors involved in deep-sea installations and deepwater rigs on a worldwide basis.”
While Gard is counting on leveraging its global expertise, Grupo Vitesse is approaching this opportunity from the Mexican experience angle. “Grupo Vitesse has developed the correct infrastructure and the capability to cover a wide array of projects in the market: this has led to maintain the quality of our service for 23 years. Success in this market depends on understanding what Pemex wants,” Álvarez Hoth says.
But carrying out insurance activities for such large investment projects also requires having a reinsurer able to cover the insurance policy. “We work with the highest quality re-insurance companies, which Pemex and Petrobras also use,” says Álvarez Hoth. “We talk to our clients constantly to see what their contracts mean for them in terms of risk and exposure. The high standards of Pemex have driven us to be very conscious about the required insurance capabilities to provide the correct coverage, measuring different types of risk that include those that deepwater might bring.”