Industry finalises coverage binding for FSO Safer oil transfer operation
Industry finalises coverage binding for FSO Safer oil transfer operation | Insurance Business Asia
Marine
Industry finalises coverage binding for FSO Safer oil transfer operation
Howden took over the insurance cover, while Fidelis MGU was one of the lead underwriters
Marine
By
Kenneth Araullo
The insurance industry’s efforts to bind coverage for the FSO Safer operation has been successfully completed today, global insurer Howden announced.
This development will allow the United Nations to proceed with the ship-to-ship (STS) transfer for FSO Safer, and in the process avert what could be one of the world’s largest oil spills.
This UN-led operation involves the transfer of oil from FSO Safer to a replacement vessel, the Very Large Crude Container (VLCC) Nautica, as well as the scrapping of Safer at a green salvage yard. The most immediate danger of an oil spill will be prevented once the oil has been transferred to Nautica. The UN Development Programme (UNDP) will oversee the emergency phase of the operation, which involves the removal of the oil.
Constructed in 1976 as an Ultra Large Crude Carrier (ULCC), FSO Safer was converted a decade later to be a floating storage and offloading facility for oil and is moored approximately 4.8 nautical miles off the coast of Yemen. Conflict in the country has prompted the suspension of maintenance operations on FSO Safer in 2015, putting in limbo the estimated 1.14 million barrels of crude oil. Over the years, the tanker’s structural integrity has significantly deteriorated, leading to efforts to de-risk what may end up as an enormous environmental catastrophe.
Howden was appointed by the UNDP to identify the insurable risks and arrange insurance cover for the non-standard STS operation. The operation is also supported by significant engineering expertise that has been mobilised to move the oil, including naval architects, chemists, surveyors and oil spill response organisations, as well as various government entities and the UN.
The insurance coverage for FSO Safer and VLCC Nautica was bound to Lloyd’s, London and P&I markets, with Fidelis MGU tapped as one of the lead underwriters. Negotiations have resulted in 13 different underwriters being “on risk,” while more than 100 individual underwriters have been involved with the risk assessment of a specialised set of policies for the operation. These are further compounded by complications relating to war risks as the FSO Safer sits in high-risk waters.
Howden CEO David Howden said that this operation is the perfect example of the power of insurance to be a force for good in the world.
“By de-risking the investment required and mitigating the risks involved in this complex and delicate operation, insurance is playing a central role in preventing one of the largest, man-made disasters the planet will have ever faced. As unique as the FSO Safer operation is, there are a whole host of scenarios where insurance plays a crucial role in protecting our planet and its inhabitants. I hope that, as an industry, we can all be inspired to do everything within our power to help build a more resilient future,” Howden said.
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