Underwriters are providing binding insurance coverage that enables the UN to proceed with the ship-to-ship (STS) transfer of oil from FSO Safer in a mission to avert one of the world’s largest oil spills and man-made environmental disasters said Howden.
FSO Safer, a floating storage and offloading facility (FSO) for oil, is moored approximately 4.8 nautical miles off the coast of Yemen, holding an estimated 1.14m barrels of light crude oil. Conflict in Yemen prompted the suspension of maintenance operations on FSO Safer in 2015. As a result, FSO Safer’s structural integrity has significantly deteriorated, leaving the ship vulnerable to breaking up and without a functioning system to pump inert gas into its oil tanks, the vessel could explode at any time said Howden.
The UN-led operation involves the transfer of the oil to a replacement vessel, VLCC Nautica and the towing and scrapping of the FSO Safer at a green salvage yard. The most immediate danger of an oil spill will be prevented once the oil has been transferred to the replacement vessel. The UN Development Programme (UNDP) is undertaking the emergency phase of the operation to remove the oil.
Howden was appointed by UNDP via a public tender process to identify the insurable risks and arrange insurance cover for the non-standard STS operation. The insurance is supported by significant engineering expertise, which has been mobilised to undertake the movement of the oil, and includes naval architects, chemists, surveyors and oil spill response organisations, as well as government entities and the UN.
The coverage both for FSO Safer for the duration of the STS operation and for the replacement vessel, the VLCC Nautica, was successfully bound in the Lloyd’s, London and P&I markets, with Fidelis MGU acting as one of the lead underwriters. Fidelis MGU is a privately-owned, Bermuda-based managing general underwriter.
The insurance negotiations over FSO Safer have resulted in 13 different underwriting entities being ‘on risk’, while more than 100 individual underwriters have been involved in the risk assessment of an exceptionally specialised set of policies for the operation further complicated by the fact that the FSO Safer sits in high-risk waters, as designated by the Joint War Risks Committee.
Insurance has played a pivotal role in de-risking the operation, which is highly complex and covers a range of environmental, geopolitical and humanitarian risks. Coverage has been placed to respond to a wide array of hazards that could arise over the course of the operation, including pollution from the transfer, explosion of the gas on the ship, personal security of the individuals involved in the operation and the removal of the FSO Safer wreck. The entire process is expected to take several months. M