Hart Energy Publishing

Krause, Ludwig: ‘Gray Hair’ Factor Key To Improving Energy-Company Liability-Coverage Costs

Gray hair is valuable in the industry—in the intellectual offering, and in companies’ cost of liability insurance too.

Nissa Darbonne
August 21, 2009
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Gray hair in E&P and oilfield-service organizations is valuable—in the intellectual offering, and in companies’ cost of liability insurance too. “I’m a big advocate of gray hair,” says Brian Krause, vice president, global practice leader, Travelers Oil & Gas, an energy-industry underwriter.

“When companies start to lay people off, there is nothing in this business that can equate to gray hair. Anybody who can keep these experienced professionals around, do everything you can: Nothing can replace that experience,” he says in the webinar A Delicate Balance—Is Insurance (Still) The Right Solution? now available on demand at OilandGasInvestor.com.

John Ludwig, chief executive officer of broker EnRisk Services Inc., says that, when preparing a client profile for an underwriting proposal, “The first thing we do is put those (experienced professionals’) bios together. They show that history of experience…

“It’s tremendously important (to underwriters) that they see the gray hairs.”

He adds that companies should offer underwriters visit with these professionals, besides providing the credentials on paper. “It’s tremendously important that underwriters meet the operational personnel.

Krause adds that these employees’ importance in liability coverage and cost is even greater today, as there are new risks in U.S. drilling operations. For example, many unconventional-resource plays are in urban areas. One, for example, targeting Barnett shale gas is on the University of Texas-Arlington campus outside Fort Worth. “You’re starting to see a lot more activity in the shales and the unique challenges that go with shale drilling—the high-pressured fracturing, for example,” he says.

Costs have jumped when drilling in urban settings, he adds. “No longer are wells being drilled in the middle of nowhere. A lot of times they’re right in your back yard…That makes for a completely different operation than in the past.”

                A 25-year industry professional, with most of these in the well blow-out cap and prevention business for Red Adair Co. and Boots & Coots International Well Control, Krause says accidents almost “always lead back to the human element…It’s not the equipment that failed; most of the time, it’s the people who didn’t maintain it.”

                Accidents increased in 2008 as oil prices pushed to $147 and natural gas was commanding more than $10. “Last year, everyone was in a hurry to drill. Everybody was just too tired.” Now that new drilling activity has slowed, “you’re seeing more of the training (under way that companies) didn’t have time to do before.”

                For more on this, and on current energy-industry insurance availability and premium cost, tune into the webinar A Delicate Balance—Is Insurance (Still) The Right Solution? now available on demand at OilandGasInvestor.com.