OIL: In Theory & In Practice Asian Offshore Energy Conference Bali, Indonesia September 30 October 2, 2015

Transcription

1 OIL: In Theory & In Practice Asian Offshore Energy Conference Bali, Indonesia September 30 October 2, 2015 George Hutchings - OIL Gerard Naisse - Total

2 In Theory by G. Hutchings

3 Who is OIL? World s Largest Energy Mutual OIL is an Energy Industry Mutual Insurance Company headquartered in Hamilton, Bermuda Formed by 16 major energy companies in 1972 after two incidents in the late 60 s that resulted in inadequate coverage / pricing Today, OIL is a world leader in global energy insurance 56 Shareholders / Policyholders - medium to large public & private world-class energy companies headquartered around the world 40% of membership has been with OIL for over 20 years

4 Who is OIL? World s Largest Energy Mutual by the numbers $2.8 trillion in assets insured globally for 56 members $400 million broad and stable cornerstone capacity $7.5 billion in balance sheet assets $4.6 billion in shareholder s equity Over $12 billion in claims paid over 40 years Expense ratio = approx. 3-6 % S&P A- rating Moody s A2 rating Investment grade quality membership

5 Current Members - 56 USA Alon USA Energy, Inc. Anadarko Petroleum Corporation Apache Corporation Arena Energy, LP Buckeye Partners, L.P. Chevron Corporation Chevron Phillips Chemical Company LLC CITGO Petroleum Corporation ConocoPhillips Company Drummond Company, Inc. DTE Energy Company Energy Transfer Partners, L.P. Hess Corporation HollyFrontier Corporation LOOP LLC Marathon Oil Corporation Marathon Petroleum Corporation Murphy Oil Corporation Noble Energy, Inc. Occidental Petroleum Corporation Phillips 66 Company Sempra Energy Tesoro Corporation The Sinclair Companies CANADA Canadian Natural Resources Limited Canadian Oil Sands Limited Cenovus Energy Inc Husky Energy Inc. NOVA Chemicals Corporation Paramount Resources Ltd. Suncor Energy Inc. Talisman Energy Inc. The Williams Companies, Inc. 5 Valero Energy Corporation 2015 Westlake Chemical Corporation AUSTRALIA BHP Billiton Petroleum (Americas) Inc. Santos Ltd. Woodside Petroleum Limited LATIN AMERICA / CARIBBEAN Puerto Rico Electric Power Authority (PREPA) ASIA EUROPE ARKEMA BASF SE BG Group plc CEPSA S.A. DONG Energy A/S Electricité de France (EDF) Eni S.p.A. Galp Energia SGPS, S.A. LyondellBasell Industries MOL Hungarian Oil & Gas OMV Aktiengesellschaft Repsol, S.A. Royal Vopak N.V. Statoil ASA TOTAL S.A. Yara International ASA China National Offshore Oil Corporation (CNOOC)

6 Membership by Industry Segment 2% Integrated Oil 2% 5% 7% 2% 25% R&M Chemical E&P 28% Other 20% Pipelines 11% Utilities Mining

7 OIL s History: 43 Years Membership Shareholders Equity Assets Gross Assets Insured 1/1/ $160 Thousand $160 Thousand $48 Billion 6/30/ $4.6 Billion $7.5 Billion $2.8 Trillion Inception To Date: Net Premiums Earned Net Losses & Loss Expense * Investment Income ** Dividends Paid *** Preference Shares Operating, Financing & Other Costs * Includes IBNR/IBNE ** Net of Interest Expense *** Excluding Preference Share dividends paid +$14.8 Billion - $14.2 Billion +$ 6.2 Billion - $ 1.5 Billion +$.3 Billion - $ 1.0 Billion $ 4.6 Billion

8 Risks Insured vs Excluded RISK INSURED MAJOR EXCLUSIONS ALL-RISK PHYSICAL DAMAGE Replacement Cost Value Actual Cash Value TERRORISM (Inc. Cyber Terrorism) CONSTRUCTION CARGO WINDSTORM / EARTHQUAKE CONTROL OF WELL Including restoration & re-drilling 3RD PARTY POLLUTION LIABILITY Non gradual (40 / 120 days) WAR, NUCLEAR BUSINESS INTERRUPTION COMMERCIAL WASTE DISPOSAL PRODUCT & COMPLETED OPERATIONS LIABILITY TANKER POLLUTION LIABILITY (except Charterer s Liability) TRANSMISSION & DISTRIBUTION INHERENT DEFECT, WEAR & TEAR ECONOMIC & TRADE SANCTIONS

9 RETAINED / MARKET / RETRO LIMIT Limits Offered Largest Single Block of Capacity for Global Energy Companies OIL $400M OIL $400M OIL $400M OIL $150M Part of $250M 60% 40% Property Damage Control of Well Non-Gradual Pollution Windstorm Roughly 78% of the members elect the $400M limit. OIL s $400M limit is a per occurrence limit. No one event can be more than $400M. OIL s Aggregation Limit is $1,200M (non-windstorm risks) and $750M for windstorms within the ANWS zone

10 Limit Allocation Options MANDATORY Mutualization of 60% of All Policy Losses No Additional Coverage OPTIONAL DESCRIPTION No losses are covered by OIL. Members retain such losses or place in the Commercial Market # of Members: 5 Standard Premium Only Plan DESCRIPTION 60% of all losses are shared among the entire Group. It is mandatory that all members participate in the Standard Premium Pool # of Members: 56 40% of Remaining Policy Losses Flat Premium Plan Retrospective Plan DESCRIPTION Members can elect to participate in the Flat Premium Plan to cover 10% to 40% of the remaining losses. Losses allocated to the Flat Premium Plan are only shared among those members participating in the Plan. # of Members: 44 DESCRIPTION Members can elect to participate in the Retrospective Premium plan. OIL will advance payment on 10% to 40% of losses to such member and only that member is responsible for repaying such loss. # of Members:

11 Rating & Premium Plan

12 Rating & Premium Plan Principles: There is no annual underwriting Pricing is formula based (no price negotiation) Operates as a 5 year post loss funding facility designed to recoup losses over a 5 year period (20% a year) All losses of the Group are mutualized by all members based on their pool % which is fixed annually. Zero sum mechanism (losses will equal premiums over time). Not for profit

13 Cumulative Losses (%) OIL s Premium Mechanism Current Year Loss Repayment Year Previously Paid To be Paid Anual Premium = Loss year yr pool % yr 20% 2010 The 8 Business sector premiums + windstorm premiums = Total Annual Premium Contribution Roughly 80% of a member s next year premium is Locked down as loss history and allocation is already determined

14 8 Business Sectors (Non-Windstorm) Defined as: OFFSHORE E&P * ONSHORE E&P * R&M * / CHEMICALS PHARMACEUTICALS ELECTRIC UTILITY PIPELINES * MINING OTHER * Utilizes sector and deductible weightings. Gross Assets are adjusted for operational risk (sector weighting) and coverage profile (limit/deductible weighting) to generate Weighted Gross Assets which is used to determine pool % and calculate individual premiums. * Original 5 sectors

15 Annual Premium Calculation - Example GROSS ASSETS BY BUSINESS SECTOR X SECTOR / DEDUCTIBLE / LIMIT WEIGHTING FACTORS X WEIGHTED GROSS ASSETS (WGA) Gross Assets Weighting Factors Weighted Gross Factors Offshore E&P = $25B Pipelines = $5B Offshore E&P = 1.50 Pipelines = 0.25 Offshore E&P = $37.50B Pipelines = $1.25B Total = $30B Total = $38.75B WGA = 38.75B / $1,046B (GROUP WGA) = 3.7% X MEMBERSHIP ANNUAL LOSSES (20%) X EXPERIENCE FACTOR - EXPERIENCE PREMIUM CREDIT = ANNUAL PREMIUM

16 OIL Technical Accreditation (OTA) New On-Line Tutorial & Official Accreditation

17 In Practice by G. Naisse

18 I. GOVERNANCE Oil and gas companies for oil and gas companies Industry focused (the origin of OIL in 1972) 2015 Policy re-write as an example No knee-jerk reaction to market events (9/11) Board of Directors composition AGM Networking

19 II. SIMPLICITY / FAIRNESS No underwriting, no requirement to list locations or wells (based on Consolidated Assets) Automatic cover of new acquisitions No sub-limit on CAT (Earthquake, Flood, etc.) No sub-limit on ROW, S&L, etc. No testing & Commissioning Clause Continuity of cover Loss modification in place as from Loss settlements

20 III. BROADNESS OF COVERAGE The limit at $400 million The 11 or so coverages CAR Cargo PD incl. MB OEE (full RR, no deep/ultra deep segregation) Terrorism with no Cyber Attack Exclusion and no Cancellation Clause OPOL compliance DIC/DIL available when local coverage is not controlled by the oil company Non-owned property (if contractually liable or CCC)

21 IV. FINANCIALS Financial strength (net worth $4.6 B at June 30) 1 st class security (based on unique Rating & Premium Plan) Owned by oil companies (dissolution rights) Excess capital returned to shareholders ($1.5 B in dividends paid to-date, premium credits )

22 V. TOTAL / OIL Original founder (1972) Cornerstone of our Property Programmes (on-shore & offshore) Systematic optimization of OIL entry through our captive: Use of all OIL coverages afforded through the 3 Insuring Agreements Repatriation of all premiums paid in regulated countries via the captive reinsured by OIL DIC/DIL in respect of countries where original coverages are not controlled by TOTAL

23 VI. Program Structure TOTAL / OIL Original Assured TOTAL Subsidiaries TOTAL Interests in Affiliates (up to 50 %) TOTAL Interests in Joint-Ventures Up to 100 % Up to Group interest up to Group interest CAPTIVE ORC OIL With OIL DIC/DIL if original wording not under TOTAL control

24 Thank You!