n the thriving energy sector, one of the more seemingly dull aspects of the business is insurance.
But the energy insurance market deals with everything from aging machinery and multibillion dollar offshore oil production vessels to more hot topic issues like modern pirates and the growing threat of cyber-security attacks.
The deepwater offshore projects are getting bigger and more costly and, therefore, more financially risky. Connors said some of the bigger projects involve the growing use of massive floating production, storage and offloading vessels, or FPSO units. They receive hydrocarbons from offshore drilling platforms and then process and store the oil to transport it onshore or to pipelines.
Then there is the growing shale boom and all the rapidly evolving technology.
“We sort of like to stick to the companies we have confidence in,” Connors said, acknowledging the public’s fears of explosions and contaminated water sources, which he said are exaggerated somewhat.
Of course, one of most prominent risk issues was sensationalized in the 2013 film “Captain Phillips” about the¬†2009 hijacking by Somali pirates of the U.S.-flagged MV Maersk Alabama. However, piracy attacks off of Somalia have declined dramatically with just seven incidents last year compared to 160 attacks in 2011, according to a new Allianz report released March 13.
“If you couldn’t outrun the pirates, you were probably going to get boarded and held for a while,” Connors said, noting that piracy has developed into a “business model” in some countries.
Allianz spokeswoman¬†Annika Schuenemann¬†said the newest piracy “hot spot” is the Gulf of Guinea in West Africa. The report said the area had 48 incidents last year. Connors also noted that Asia has dealt with piracy for years, including areas around Indonesia.
He said companies also face risks internationally, especially in third-world countries, with people trying to steal from pipelines and causing explosions, intentionally or not. These are the areas with the most “strikes, riots and civil commotion,” where the general public is not benefiting from the oil production in their towns, he said.
The Allianz report also noted anticipated upcoming risks of transporting liquefied natural gas from the Gulf Coast to other nations and the involvement of ports that have never handled such cargo previously.
Connors said another key growing risk involves¬†cyber threats targeting energy companiesand their infrastructures.
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Jordan Blum covers energy for the Houston Business Journal. Read the top Texas energy news in our free weekly newsletter, Energy Inc.¬†Click here to subscribe to the Energy Inc. newsletter.