Making landfall at 06.10 local time on 29 August 2005, Hurricane Katrina devastated a massive area of the US Gulf Coast, leaving over 1000 people dead and around 300,000 without homes.
Naturally, in the immediate aftermath of the disaster, the world’s attention was seized by this terrible human tragedy. But, as thoughts turned to reconstruction, the scale of Katrina’s economic and commercial impact became clear.
In particular, the energy industry – a hugely important contributor to the local, national and global economy – had suffered heavy losses. A number of oil and gas platforms in the Gulf of Mexico had been destroyed, and very many more had sustained damage serious enough to put them out of action for many months.
The total cost to the offshore industry was over $5 billion, most of which was a loss for Lloyd’s, since we are a clear market leader in this class of business.
It hurt, of course. But we cemented our reputation in the US by the promptness of our response and our willingness to settle all valid claims in the wake of the 1906 San Francisco earthquake; and, a century on, we had no intention of not living up to this.
“Lloyd’s really stepped up to the plate,” says Munich Re underwriter Dominick Hoare. Many of the clients in his offshore energy portfolio are small operators, without the resources to withstand a major interruption to their business.
“To them,” he says, “insurance is critical. How their insurer reacts in a crisis like this can make or break them.”
Moving fast to keep a client afloat
One of the businesses hit was energy company Palm Energy Partners, whose single installation in the Mississippi delta survived Katrina, but only just. To get production back online, they urgently needed to buy new pipeline – without which, of course, they would have no revenue.
While some insurers might have wasted weeks or even months disputing the terms of a very complex policy, Lloyd’s settled the claim fast; the company was able to pay for the replacement pipeline; production resumed… and a business that could easily have been destroyed by Katrina is alive and well.
With thanks to:
Client: Palm Energy Partners
Lloyd’s broker: Mark Jenner, Agnew Higgins
Underwriter: Dominick Hoare, Munich Re
