Insider In Full: Downstream energy insurers brace for $50mn-$100mn loss from Balongan refinery explosion
Downstream energy insurers are bracing for a potential loss from the explosion at a Pertamina-owned refinery in Balongan, Indonesia, Insurance Insider understands...
AJ Gallagher is the broker for the policy, with AIG and Axa XL understood to be on the slip. Sources told this publication that the policy is mostly placed with local markets, with limited London market participation.
There is still uncertainty around the size of the loss, but sources have estimated that the loss could be between $50mn-$100mn.
A fire broke out at the refinery around midnight on Monday, 29 March, impacting four storage tanks at the facility. The refinery was forced to close temporarily and around 950 nearby residents were evacuated. Around six people were treated in hospital as a result of the fire, according to news reports.
It is one of the largest refineries in Indonesia with a total capacity of 1.35 million kilo litres. The four tanks represent around 7% of the total storage capacity, according to Pertamina.
In a statement on Wednesday, 31 March, the state oil firm said that all fires had been extinguished. It added that it was undergoing a cooling down process and was planning to restart the refinery as soon as possible. The cause of the fire is currently unknown, but an investigation is underway.
Sources said that as most of the damage occurred in the storage tanks, rather than the main refinery, the loss would be mitigated as it would not impact production unduly.
The downstream energy market has been hardening for several years following heavy losses in the sector leading to significant capacity constriction.
In a report earlier this year Marsh said that rates have increased by an average of 25% for the sector and that global losses for 2020 were below $2bn which was “within expected tolerances”.
It warned that market conditions for 2021 would remain challenging for downstream energy customers, despite an improvement in pandemic related issues in the first quarter.
A Willis Towers Watson report from last year said that the downstream energy market was on track to make a profit for the first time in five years.
AIG, Axa XL and Gallagher declined to comment.
Pertamina was contacted for comment.
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