S&P Expects Re/Insurance Losses from Gulf Oil Spill to Be Minimal

Based on what are so far only preliminary estimates, Standard & Poor’s Ratings Services said it expects insured losses from the oil spill in the Gulf of Mexico “to be significantly less and be spread among multiple markets and re/insurers.”

The report, published on S&P’s RatingsDirect, is entitled “Despite Significant Environmental Damage, The Gulf Oil Spill Losses to Re/Insurers Are Expected to Be Limited.” S&P indicated that “preliminary net loss estimates by some re/insurance companies indicate that losses could be contained within second-quarter 2010 results.”

Nonetheless, S&P stressed that the “Deepwater Horizon oil rig explosion in the Gulf of Mexico in April is likely to become one of the largest oil spills of all time, and the cost will be significant because the contamination area continues to spread. The early economic damage estimate from this man-made disaster has already reached a few billion dollars.”

The report notes that “some of the early disclosures include only the property losses, as the liability portion is difficult to estimate at this point.”

However, S&P said it expects “losses from this event–with the possible exception of a few outliers–to affect earnings rather than capital. Based on these early estimates alone, we do not expect to change any ratings at this time as a result of the oil spill,” S&P concluded.

Source: Standard & Poor’s