OT14800 | PRT: associated party transactions - insurance - information

It will normally be necessary to obtain a copy of the captive’s accounts and a full and detailed explanation of the insurance arrangements.

The following is a list of the information which it is suggested should be obtained or assembled when, with a possible restriction under OTA75\Sch4\Para2 in mind, it is decided to review the insurance arrangements of a company which has effected cover either directly or indirectly with the captives.

1. Name of captive insurance company.

2. Direct (AB) or indirect (ACB) route employed?

3. Premiums paid -

• assemble comparative data covering say 3 or 4 years;

• distinguish period of construction if appropriate;

• obtain explanations of large variations from one period to next;

• express rate as percentage of asset value.

1. Property covered - e.g. platform, other offshore plant, pipeline, stores etc.

2. Risks covered - e.g.

• physical loss/damage, noting any limitations;

• terrorist activity;

• loss of profits (premiums not allowable).

1. Limit of liability overall.

2. Excess borne by producing company?

3. Excess borne by captive?

4. Level of asset cover - replacement value subject to maximum?

5. Construction period - insured with different company to that after production started? Note - a captive insurance company is often brought into play only after construction is completed.

6. Any evidence obtained of arm’s length premium quotations during enquiries on insurance placed with the captive may be useful in terms of general information on the subject - although we are of course concerned with costs and not market rates under OTA75\Sch4\Para2.

7. A copy of the overseas captive’s accounts.

8. Is Oil Insurance Ltd involved? This is a Bermuda based oil company “cooperative” - (see OT14840).

9. The basis on which premiums have been allocated to North Sea assets, and in particular to PRT paying field assets.