Insurance industry vital to meeting forecast demand for reliable energy supplies, Aon tells United Nations hearing

Bookmark and Share

LONDON, 17 January 2007 – Members of the United Nations (UN) Committee on Sustainable Energy have heard the valuable role the insurance industry will play in enhancing safety standards at energy companies and supporting the continued supply of energy globally during times of crises.

Magne Seljeflot, chairman of Aon Natural Resources and the only financial services representative on the UN Committee on Sustainable Energy, told its last hearing of the role the insurance industry can play in the risk mitigation associated with emerging energy security issues. He believes the industry will be crucial in allowing politicians and businesses around the world to deliver on their pledges to cut CO2 emissions within sustainable business environment.

Magne Seljefot said: “At the end of 2006 strong growth in demand for hydrocarbon based energy coincided with concern over future reserves, security of transmission and energy prices at an all time high. The continuing quest for new oil and gas fields takes us further into remote and ‘unchartered’ territories.”

Magne Seljefot told the UN committee that only a handful of the largest companies in the world had the “financial muscle” to consider exploration and development in the new territories, given the costs and risks involved. “To succeed in exploring, developing and bringing energy to market can be a mammoth technological and economical undertaking. Without the partnership with insurers to reduce risk factors, this would often not be possible. Look for example at the development of the North Sea in the 1970’s.”

The insurance industry supports safety practices among hydrocarbon providers. Magne Seljefot highlighted that in 2005 insurers paid out claims “in excess of $10bn in respect of losses to the energy sector, against $4bn-6bn in an average year”. Incidents at the Alyaska pipeline and BP’s Texas City refinery among others last year raised the question of safety standards in the industry. He stressed that the highly qualified and experienced engineers employed by the major insurers have a valuable input to establishing best practice and “raising the ‘Red Flag’ when they see safety being compromised”.

Magne Seljefot believes that the insurance industry can act as a valuable conduit between politicians and hydrocarbon businesses to ensure the safe and reliable supplies of energy around the world. “This is particularly important at a time of strong demand for energy from China, India and others along with rising geopolitical supply risks in the Middle East and Russia.”

About Aon

Aon Corporation is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 46,000 employees working in Aon’s 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.

Tags: , , ,