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Risk Issues

Understanding risk in the oil and gas industry

Businesses today face a wide range of risk issues – from natural disasters to man-made problems such as terrorism, political risk and employee theft. Sisk & Co. provides the strategies and solutions that help businesses to not only manage the oil and gas industry risks and challenges these issues present, but also anticipate them.

Cyber Risk, Technology Errors and Omissions
Sisk & Co. works with leading cyber risk insurers to develop cyber risk insurance protection for a wide range of Internet and network exposures. Internet and networked technologies have changed many aspects of how business operates. The ability to readily store and share data across interconnected networks has created new efficiencies in sales and marketing, data access and retrieval, and vendor relations and interaction.While the benefits of using Internet-based technologies are numerous, so are the inherent risks, which include:

  • Theft or manipulation of sensitive or private information such as financial or health records
  • Computer viruses that can destroy data, damage hardware, cripple both your systems and the systems of your vendors and even disrupt a business’ operations
  • Computer fraud

With the growing number of these threats, traditional insurance policies have come to specifically exclude these risks. To protect against these and similar exposures, Sisk & Co. offers risk management and insurance solutions to address these complex risks, including:

  • Detailed insurance gap analysis
  • Security policy review and development

We work with leading cyber risk insurers to develop cyber risk insurance protection for Internet and network exposures, including:

  • Liability: privacy and confidentiality
  • Copyright, trademark, defamation
  • Malicious code and viruses
  • Business interruption: network outages and computer failure
  • Intellectual property infringement

Directors & Officers Liability
There is little directors and officers can do to diminish the complexity of the business, legal and regulatory environment in which they operate. However, a great deal can be done to protect the personal assets of directors and officers through a combination of strong corporate governance, broad corporate indemnification, and a risk transfer program that includes a high quality Directors & Officers Liability Insurance Program.Directors and officers operate in an extremely difficult environment. The fundamental principles governing their conduct have come under increasing judicial and regulatory scrutiny.

Sisk & Co. has relationships with notable carriers, and works to provide coverage for directors and officers that is lacking in standard liability policies. Coverages include:

  • Coverage for individual directors and officers when not indemnified by the corporation
  • Coverage for the corporation (organizations) when it indemnifies the directors and officers
  • Coverage to the corporation (organizations) itself for securities claims brought against it

At its roots, D&O insurance insures “behavior” in that the decisions of directors and officers are the matters which often lead to covered claims. That is, an incorrect decision often leads to shareholder discontent and, thus, a lawsuit against the directors and officers who made the decision. It provides coverage for defense costs and damages (awards and settlements) arising out of wrongful act allegations and lawsuits brought against an organization’s board of directors and/or officers.

Employment Practices Liability
Employment related risks are among the most potentially damaging exposures. Often centering around sexual harassment, wrongful termination and discrimination, employers of all sizes face potential damage from employment practices liability (EPL) lawsuits, which can not only result in financial disaster, but also irreparable damage to an organization’s reputation or brand image.Equal Employment Opportunity Commission (EEOC) claims have risen to record levels in recent years. Employment Practices Liability Insurance (EPLI) is designed to help employers respond to growing EPL exposures, such as those described above, mitigate the impact of EPL risks and protect a company’s bottom line, which extends beyond the financial loss.

Sisk & Co. works with reputable carriers to combine insurance and risk management techniques designed to:

  • Lower the cost of transferring employment practices risk
  • Protect the company, its directors and officers, as well as employees for claims brought by past, present or prospective employees (and third parties)
  • Reduce the risk of costly litigation

Products & Liability Recall
Unique liability challenges exist for businesses in relation to the manufacture, sale and distribution of products, including warranty issues relating to their performance.A product recall can devastate a company’s brand name and profitability. No matter what its size, industry, location, or reputation, a company can be left in ruins if it does not manage a product recall well. To minimize the costs and mitigate the risks associated with such an incident, companies must proactively assess and manage their product recall risks.

Sisk & Co. works with the insurers to ensure our clients have the appropriate strategies and protocols in place to minimize the impact of product liability and mass tort exposures, as well as the appropriate insurance coverages to protect them in the event such a claim occurs.

Professional Liability
Professional liability has become the “products liability” of the service sector. Professional liability coverage can protect against liability and help defray the cost of defense following a claim for an error, omission, or negligence in the performance of professional services.Professional liability risks are complex and extensive, and identifying and quantifying these liabilities requires a high degree of expert scrutiny. Sisk & Co. works with our clients to identify the evolving exposures, and develop risk transfer solutions and coverages designed to fit the specific needs of our clients.

Transport and Cargo Legal Liability
Let’s face it, the more cargo you handle, the more likely you are to suffer damage, destruction or loss that can cost you a lot of money. Natural and manmade disasters are occurring with frightening regularity, bad weather is a fact of life, and unfortunately, there are dishonest people in the world. There is nothing you can do to prevent all these causes of loss, but you can take action to ensure that neither you nor your clients have to suffer substantial financial loss when things do go wrong.Cargo legal liability provides coverage for physical loss or damage to property of others while being transported either internationally or domestically. Having the right insurance in place not only protects you and your client’s from devastating losses, but it can also serve as a substantial source of revenue for the savvy freight forwarder and / or custom broker. Having the right Cargo Legal Liability policy in place can:

  • Increase your profit on every transaction
  • Protect your customer from cargo-related financial loss
  • Enable you to provide complete service to your client
  • Enhance your image as a knowledgeable professional

Riggers Legal Liability  
Riggers legal liability insurance provides coverage for a contractor’s liability arising out of the moving of property and / or equipment that belongs to others, such as lifting compressor units onto a flat bed with a crane.The standard Commercial General Liability (CGL) policy does not cover this risk due to the exclusion for “personal property in your care, custody, or control”. While the Inland Marine (IM) policy was created to add protection for this exposure, many IM policies have specific exclusions for equipment while on-hook.

Sisk & Co. works with our clients to fully understand their business and its exposures. Our market access allows for the insurance coverage and solutions to provide protection from this exposure.

Pollution Legal Liability
The majority of General Liability policies cover pollution only from Sudden and Accidental events. They have time-bound restrictions on when the event was discovered, as well as how soon it must be reported to the carrier.Pollution Legal Liability (PLL) provides property owners and operators across all industries with coverage for pollution conditions associated with owned / operated properties, disposal sites, contracting operations and transportation exposures.

With environmental claims on the rise, Sisk & Co is aware of the exposures their clients face, and work with specific carriers to provide coverage for these exposures.  Coverages include:

  • Sudden and gradual pollution conditions
  • Third-party claims for bodily injury, property damage and clean-up costs arising from on-site or off-site pollution conditions
  • Defense of third-party claims up to the limit of the policy
  • Pollution conditions associated with all of the named insured’s properties and contracting activities can be insured without scheduling individual sites or operations

Political Risks (Confiscation, Expropriation, Nationalization & Deprivation) Insurance
Political risk coverage typically purchased by businesses that have an ownership interest in property abroad, to cover loss resulting from government nationalization of the property or other action by the government that effectively deprives the insured of the property or restricts its operations.Sisk & Co. works to structure the coverage to insure such assets as bank accounts, intercompany bank loans, accounts receivable, inventory, retained earnings, supply and work in progress. Deprivation coverage, which insures against the risk of a government action preventing use of the asset (such as denying a permit to run a plant) can be added to the basic Political Risks policy.

Sisk & Co. has been monitoring changes to the Terrorism Risk Insurance Act (TRIA) since it was originally signed into law in November, 2002, and reinstated several times over.Terrorism insurance and associated risk management strategies are dynamic and complex issues, with many interdependent factors contributing to managing the risk. Foreign relations, the effectiveness of homeland defense, and the ambiguous nature of the risk make terrorism losses extremely challenging to predict and quantify. It is difficult for insurers to effectively price and reserve capacity for their otential exposure to catastrophic terrorism losses.

Sisk & Co. has the market relationships needed, both domestic and foreign, to provide extremely viable options for coverage with financially stable institutions able to withstand the potential catastrophic losses.

Builder’s Risk Insurance
Builder’s risk insurance is a special type of property insurance which protects against damage to buildings while they are under construction. The coverage protects a person’s or organization’s insurable interest in materials, fixtures and/or equipment being used in the construction or renovation of a building or structure should those items sustain physical loss or damage from a covered loss.

On & Offshore Rig Property Damage (Rig PD)
Due to the high dollar value of drilling rigs, many insurers shy away from this coverage. Land Physical Damage policies can include coverage for the rig and miscellaneous property used in the exploration and development of hydrocarbons. Examples include contractor’s equipment, scientific and sampling instruments, field equipment and associated vehicles.Most Offshore Physical Damage polices cover “all risks” physical loss or damage to fixed offshore drilling, production and accommodation facilities as well as mobile drilling rigs such as jack-ups, semi-submersibles and drill ships.

With the restricted range of insurers willing to offer coverage for this market, it’s important to have a broker experienced in the coverage that can ensure the broadest coverages and endorsements are added to the policy. Our familiarity with the industry and broker relations allows Sisk & Co. to be the experienced broker needed for implementing such coverage.

Longshore and Harbor Workers’ Compensation Act (LHWCA)
This statutory workers’ compensation scheme was first enacted in 1927, and covers certain marine workers, including most dock workers and marine workers not otherwise covered by the Jones Act.

This specific insurance coverage is required for many contractors and workers that work in and around a body of water. The specific rules and nuisances of this coverage and when it is to be applied are vast, and having an insurance broker familiar with the coverage is pivotal in ensuring you are not left with any gaps in coverage.

Maritime Employers Liability (MEL)
Maritime Employers liability covers claims against you from employees for injuries and death under the Jones Act, the death on the high seas act and a number of other acts. What this means is that your employee is suing you as a seaman. This policy exists to protect you in the event that you get sued under these laws. Any time you have an employee going offshore you have a potential exposure to these type claims, and that exposure increases dependent upon how and where and for how long your employees work in a marine environment.

Marine Liability Insurance
Maritime insurance was the earliest well-developed kind of insurance, with origins in the Greek and Roman maritime loan. The premiums varied based on intuitive estimates of the variable risk from seasons and pirates. Today, Marine Liability covers the loss or damage of ships, cargo, terminals and any transport or cargo by which property is transferred, acquired, or held between the point of origin and final destination.