In the post-gusher phase of the BP oil spill – if it happens anytime soon and that’s not 100 percent certain by any means – then among the many, many issues will be insurance coverage. So it’s interesting that the various BP policies are starting to make news.
It’s always been accurately reported that BP is “self insured,” meaning it relies on those huge profits to pay liability. But within that context things can get complicated, in part because BP actually owns its own insurance company. Now it’s news that it’s own insurance company, Jupiter Insurance, which is based in England will pay out “only $700 million for the spill.”
Well, that’s $700 million not coming from the company’s tens of billions of annual profits … but perhaps more interesting is that it illustrates the network of finances that a company of that size creates. You could say this is just the start of the insurance debate, except that it already started.
At least as early as May, the insurance battle had entered Houston courts when about half the syndicates that make up the famous Lloyd’s of London insurance market took legal action against BP, which was trying to claim all or part of $700 million in insurance coverage for Transocean, the operator of the Deepwater Horizon. BP was trying to claim it was covered under the Transocean policy.
These will of course be interesting enough in a legal sense, but the “take away” is that we are dealing with one of the world’s truly secretive corporations. These insurance issues and corporate structures are not designed to be simple; they are designed by very smart people to confuse legal issues and evade corporate responsibility. Eventually, the real issue is demanding transparency from BP, something our regulators have not done and Congress is only now considering in any serious way.