Energy companies run some of the most concentrated risks in the economy: a single blowout, refinery fire or offshore storm can produce losses that exceed the capacity of ordinary commercial insurers. As a result, energy insurance is written by specialist underwriters and is heavily supported by reinsurance and the London market. This guide outlines the main covers for oil and gas and for renewable energy.
Upstream, midstream and downstream
| Segment | Typical operations | Core covers |
|---|---|---|
| Upstream | Exploration, drilling, production, onshore and offshore | Control of well, platform and rig physical damage, pollution, liability |
| Midstream | Pipelines, gathering, storage, terminals | Property damage, business interruption, pollution, liability |
| Downstream | Refining, petrochemicals, distribution | Property damage and business interruption, machinery breakdown, liability |
Control of well insurance
Control of well coverage, also called operator's extra expense (OEE), is the signature upstream cover. It responds when a well flows out of control, and is commonly built in three parts:
- Regaining control of the well, including specialist well-control firms, firefighting and relief wells;
- Redrilling and extra expense to restore a well damaged in the incident to its prior condition;
- Seepage, pollution and contamination clean-up and related third-party liability.
Coverage is usually triggered by a defined blowout or loss of control, so the definition of "out of control" deserves careful reading. Operators, non-operating working interest owners and some contractors buy it; joint operating agreements often specify who insures and in what share. General liability policies commonly exclude well-control events, which is why the separate cover exists.
Offshore financial responsibility in US waters
Offshore operators must also prove they can pay for spills. Under federal rules at 30 CFR 553.13, a covered offshore facility located in the Outer Continental Shelf must demonstrate oil spill financial responsibility of $35 million when its worst-case discharge is over 1,000 and up to 35,000 barrels, rising in steps to $150 million when the worst-case discharge exceeds 105,000 barrels. Insurance is one accepted way to make that demonstration. State waters and other countries have their own rules.
Property, business interruption and liability
Platforms, rigs, pipelines, compressor stations and refineries are insured on all-risks property forms, frequently combined with business interruption cover that pays lost profit after a covered loss. Machinery breakdown is critical for rotating equipment. Liability programs combine general liability, pollution liability, commercial auto, workers compensation and high umbrella limits. Contracts in the oilfield commonly allocate risk through reciprocal indemnities, often called knock-for-knock, and insurance must be arranged to support those indemnities.
Renewable energy projects
Wind, solar and battery storage projects follow a different life cycle:
- Construction phase — builder's risk or erection all risks (EAR), including transit of components and delay in start-up; see our builder's risk guide;
- Operational phase — all-risks property and business interruption, machinery breakdown, natural catastrophe and liability;
- Specific issues — serial defects in components, hail and wildfire exposure for solar, fire risk for battery storage, and weather or revenue hedges for output volatility.
Lenders usually set detailed insurance requirements in the financing documents, so involve the insurance adviser early.
How energy risks are placed
Underwriters require detailed information: well data and drilling programs, engineering surveys, loss history, maintenance practices, emergency response plans and contract terms. Large programs are often shared among several insurers and supported by energy reinsurance, with layers placed in the US, London and other international markets.
Claims in energy insurance
Energy claims are technical and often long. Notify insurers immediately after an incident, involve loss adjusters early, document costs separately for each coverage section and keep daily records during well-control operations. Disputes often turn on when a well was brought under control, so accurate logs matter.
See the energy category for an overview. Policies are issued by licensed insurers and placed through licensed producers in your state or country; request a quote or contact us to discuss your risk.