A recent report by Risk Management Solutions (RMS), a company with expertise in the quantification and management of catastrophe risks, further indicates the high potential for a tropical storm or hurricane to pass over and through the gulf oil spill. Wonderful news, right? Ugh, keep reading...
RMS' disaster model is predicting a 13 percent chance that a hurricane will pass over the oil slick and a 7 percent chance that a Category 3 or higher storm hits the slick, which is higher than in an average storm season, when there would be a 4 percent chance of a major hurricane directly hitting the region. A tropical cyclone moving through the slick would bring with it the potential for storm surge to carry tar deposits far inland.
RMS also believes there is about a 15 percent chance that a hurricane or tropical storm comes within 100 miles of the slick by the end of this month (July), and about a 40 percent chance that one does so by the end of August. A storm passing that close to the slick has the potential to bring high waves that break protective booms and allow the oil to be displaced into coastal salt marshes and beaches above the tide line.
Among many of RMS' key niches is providing disaster assessment to insurance companies, and it says the still-growing oil spill will cost insurers between $1 and $3 billion dollars.
It is important to note that residue deposited from oil spill on privately owned property or land as a result of a major hurricane would not be covered by homeowners insurance. Consequently, costs for land-based clean up could be picked up by British Petroleum (BP).
RMS expects the oil spill will have a significant and long-lasting impact on offshore energy insurance availability, rates, and coverages.
Finally, the RMS report concludes that costs for deepwater drilling in the waters off the United States' coastlines will be significantly increased as a result of the inevitable creation of a new offshore regulatory agency.
Time will tell how this all shapes up, but most importantly, be hurricane AND oil ready!