U.S. refineries and petrochemical plants are cutting back on insurance because s...
- U.S. refineries and petrochemical plants are cutting back on insurance because several years of severe accidents have driven up the cost of coverage, industry and insurance sources said.
Insurance rates for property damage and business interruption have increased as much as 100% for some refiners, particularly those that have experienced explosions or fires in the past. Energy companies, which have traditionally bought billions of dollars in insurance, are buying less coverage than in the past.
The heightened risk comes after a series of high-profile accidents, including several explosions at petrochemical plants in Texas and last year’s blaze that shut the Philadelphia Energy Solutions refinery. Losses are mounting for what is known as business interruption policies, which provide coverage for companies that lose income after operational problems, according to Michael Buckle, managing director of downstream natural resources at rival broker Willis Towers Watson.
Insurers have increased the cost of coverage by 25 percent to 100 percent, depending on a variety of factors including the insurer’s assessment of risk based on a history of losses. Some refiners are responding by curbing their coverage. Refining margins were strong through 2018 and 2019, which discourages refiners from shutting down for maintenance.
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