Oil Insurance Company: Cornerstone in Protecting Your Future!
“Our main goal is to secure the long-standing performance and development of our clients’ businesses by rendering highly qualified services aimed at protecting their interests against any unforeseen risks.”
Zharkyn Alzhanov, Chairman of the Board of the Oil Insurance Company
In 2002, the Oil Insurance Company (OIC) celebrates its seven-year anniversary. During this period it has come a long way, from being a small firm working with agricultural enterprises to become one of the largest companies in Kazakhstan. OIC has branch offices in almost every region of Kazakhstan, personnel of 1500 highly qualified professionals, and an authorized capital of 250m tenge. The number of its individual and corporate clients, which include large companies and banks, reached 140,000. In the 2000 and 2001 “Choice of the Year” poll, the company won the title of “Number 1 Insurance Company in Kazakhstan”.
The active use of international insurance experience along with reliability and creative approach to solving problems have led the company to one of the leading position in the fiercely competitive home insurance services market. In just six months of 2002, the company earned 2.3bn tenge in insurance premiums, which is 56.6% higher than in the whole course of the last year. In 2001, the total payouts on claims amounted to 121m tenge, thus topping the previous year’s record by 25%. In general, in 1997-2001 the company paid 403m tenge in insurance indemnities.
OIC offers people and companies operating in various industries a long list of insurance services drawn both with western re-insurers and brokers and those based on in-house research. A factor contributing to the company’s success is its activity on the reinsurance market: contracts signed by OIC with large Japanese, German, British, American, Swiss, Russian, Turkish and other reinsurance firms prove that the company is a reliable and qualified partner.
OIC receives the bulk of its premiums from insuring the risks of oil and gas companies, including TCO, OKIOC, KazakhTurkMunay, Hurricane Kumkol Munai, Nimir Petroleum, FIOC and others, since this sector of the Kazakh economy has a huge investment potential that attracts large oil and oilfield service companies.
However, the production, refining and shipment of oil involve elevated risk. Accidents in oil fields and refineries cause economic and environmental damage, and sometimes take human lives. The removal of the consequences of such drastic events entails immense expenses that could greatly disrupt the company’s business. Yet, there are ways of mitigating such losses from additional financial sources. OIC has developed a special system of insurance coverage for companies’ finance for oil operations in general and drilling in particular.
Insurance of Drilling Operations
This program deals with all phases of hydrocarbon field development projects. It provides the full coverage for all losses that can be incurred by the insured in the event of accidence and that are specified in the insurance policy. The insurance can be provided to any company—either contractor or operator—that explores, performs seismic testing, drills testing or production wells and uses production equipment. OIC covers against the following risks:
The coverage is provided for all the necessary and reasonably incurred expenses related to:
• recovery or attempts to recover an insured well, and other wells (if any) that can not be controlled because of the insured well;
• extinguishing or attempt to extinguish an above-ground fire caused by the runaway insured well; control of the fire on other wells initiated by the runaway insured well;
• extinguishing or attempt to extinguish any other fire in the vicinity of an insured well, which threatens with blowout or fire on the insured well.
The insurance package covering runaway of wells includes an optional insurance of the following risks:
Underground pressure control
This supplement covers all losses of the insured company connected with the recovery or an attempt at recovery of any spontaneous underground flow of oil, gas, water or other liquid from one zone to another through an insured well bore, if such flow hampers regular operations and could not be stopped using available equipment at the well.
The insurance package against environmental pollution includes an optional coverage of the following risks:
• fire, lightning, storm, flooding, internal explosion, or explosion over the surface of land, sea or other water reservoir
• fall (collapse) of a lifting device or tower
• collision with any vehicle
• accidents involving anchors, chains, trawls and fishing nets
• strikes, riots, civil commotions and malicious acts.
Safety precautions and safety monitoring
All expenses due to ruined or damaged well equipment (drill pipes, bits, etc.) or salvaging of such equipment, for which the insured is liable under a lease agreement and which is located on the insured area.
2. Repeated drilling expenses
Under this section OIC covers all the expenses for the recovery and repeated drilling of insured wells or their parts, if the loss or damaging of the well occurred as a result of:
• well runaway• damage of drilling and repair equipment due to surface explosion, lightning, storm, hurricane, flooding, the fall of derrick, oil rig or crane, earthquake, volcano eruption and tsunami
• drill string breakage or freeze-in.
This supplement covers all losses due to repeated drilling of insured well that was damaged in a well rig or platform crash caused by risks other than blowout.
In this section, protection and indemnity insurance is provided for the pollution of the insured area as a result of well runaway, or damage to the environment, health and property of the third party.
Evacuation expenses are covered, if the evacuation order is received from authorities, in event of the well runaway and actual or threatening oil or gas escape. (This form of insurance is usually used for onshore operations in the vicinity of densely populated areas.)
In addition to above types of insurance, OIC offers oil and gas companies an umbrella coverage with standard insurance policies for property damage, business interruption, liability insurance and other classic forms of non-life and life insurance. Insurance is offered for the property owned or rented by the company or brought by contractors for oil operations. These could be buildings, structures, transfer devices, pipelines, drilling platform enclosures and mechanisms, barges and vessels used for the drilling and production of oil, special devices and equipment for geological surveys and exploration, spare parts, units and other materials needed for the operation and maintenance of oil and gas wells. The list of property also includes final products kept in special storage facilities and transported by pipelines, as well as construction-in-process, capital construction, etc.
Unlike other insurance companies, OIC insures hydrocarbon processing, storing and transporting; pipeline building and field development risks.
OIC will continue to strengthen its positions on the oil operations insurance market. It is confident that meeting the client’s demands and needs is one of the major factors contributing to its success.
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