To start off -- Asset insurance ~ What is it?
Asset Insurance is the safety net shielding companies from experiencing the disastrous outcome of environmental incidents or even equipment breakdowns leading to disarray. But what happens when this crucial shield isn't configured correctly or managed properly?
Let's go over the vital role of asset insurance has in the Oil & Gas domain and the chaos that unfolds when it's overlooked. Companies may face significant vulnerabilities, much of which is not fully understood if a company doesn't even attempt to scope what they should or should not cover with insurance.
The repercussions of inadequately structured insurance control can be severe. First and foremost, companies are exposed to substantial financial risks, but ongoing effects of business disruption, the requirements to pay for environmental impacts that are caused by commercial oil endeavors, and the inability to fulfill contracts compounds the threat. In the event of environmental incidents, accidents or even equipment failures (there are many threat sources), the financial burden falls entirely on the company. In extreme cases this can lead to potential bankruptcy or severe financial strain.
The need for Asset Insurance goes beyond recovering from financial burdens.
None of this should come as any surprise, but another increasingly concerning aspect of asset protection, or the lack thereof is regulatory compliance around this activity. Many jurisdictions have now mandated specific insurance coverage for oil and gas operations to ensure protection for the environment, employees, and affected communities. Failing to meet these requirements can result in hefty fines, legal complications, and even the suspension of operations.
Causal Capital has recently released new Risk Based Research Training that assists Oil & Gas companies review their level of compliance with regulations and perform Business Impact Assessments from ineffectively calibrated insurance coverage strategies.
BUSINESS CONTINUITY PLANNING
The hindrance in being unable to recover from unforeseen events leaves many companies struggling to fully resume operations and this commercial effect compounds losses, damages market competitiveness and harms business growth. A sound Asset Insurance Management Framework or AIMF as we're coining it, should be able to model these types of impacts and losses.
Furthermore, the absence of comprehensive insurance coverage generally affects the confidence levels of investors and stakeholders. Investors are typically more inclined to support companies with a robust risk management strategy that includes a sound AIMF, a system that is able to clearly report potential exposure to different classes, and how these situational hazards are managed.
Causal Capital has crafted an "Asset Insurance in Oil and Gas Specialist" Masterclass, join us on the public online delivery in January 2024. You can find the details for the program here: Link. In case interested in attending such a program, or organizing it for your team at a later time, contact the Causal Capital team at Training@CausalCapital.org and schedule a meeting with the agents. They will be able to advise and support you along the way in getting your team on top of Asset Insurance and successful implementation of industry best practices!
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