Media reports suggest that BP’s D&O insurers could face significant exposure to claims stemming from the Deepwater Horizon disaster.  As we previously reported, BP self-insures much of its property and liability cover through its captive insurer, Jupiter Insurance Ltd.  According to media reports, Jupiter does not purchase reinsurance; but it does currently have over $700 million on hand to respond to Deepwater Horizon claims.  Several Deepwater Horizon-related lawsuits that were recently filed against BP’s directors have brought out evidence that BP purchased substantial D&O coverage in the commercial market.

Reports suggest that BP management, seeking to avoid potential conflicts of interest, purchased $400 million in Side-A D&O liability coverage through Marsh Ltd., all of which was in force at the time of the Deepwater Horizon explosion.  The coverage is arranged in an eight-layered tower.  Ace Bermuda International has the primary layer ($25 million), over which Zurich wrote $25 million in first-layer excess coverage.  Other insurers participating in the program include Chartis, Ace European Group, Axis, Liberty Mutual, The Hartford, QBE, Arch, Great Lakes, and Beazley.  The $155 million top-level excess layer is divided into shares, of which Chartis has the largest ($20 million).

The fact that BP purchased such a large D&O insurance program suggests that a significant cross-section of the international D&O market has potential exposure on Deepwater Horizon claims.

We will continue to provide updates on this and other Deepwater Horizon-related insurance issues on www.InsureReinsure.com.