EXPENSIVE SPLASHDOWN

Despite five days of round-the-clock efforts to save it, the 40-story oil rig, the world’s largest, owned by the Brazilian state oil company Petrobas, sank in over 3,000 feet of water 80 miles off the coast. The rig sustained damages estimated at around $360 million following the initial blast that crippled the rig. Its loss could raise that total to $650 million. According to a report from Reuters News Agency, 16 carriers share the initial coverage of $500 million, but there is also an excess layer of $150 million. Only three companies have more than 10 percent of the loss, and all of them carry reinsurance through the Lloyd’s market.
Reuters singled out ACE Ltd., XL Capital Ltd., American International Group and CNA Financial as being involved in the coverage, but no comment has yet been made by any of these companies. However, a spokesman for the St. Paul companies acknowledged that it had a maximum exposure of $5 million through its Lloyd’s operation and St. Paul Re. Petrobas expects to receive payment on the loss within the next 3 to 6 months, which will cover its initial $350 million cost and the reimbursement of expenses linked to the five day salvage operation. It does not expect to recover its economic losses, however.