The reinsurers said it had made the move amid fears of the liability level which will be put in place for rig owners and operators in the Gulf of Mexico following the Deepwater Horizon loss.

It said: “Munich Re has developed a new concept for insuring offshore oil drilling, which has the potential to create cover in the order of $10–20 billion per drilling operation in the international insurance market.”

Munich Re Board member Torsten Jeworrek is convinced there will be demand for the cover.

“If coverages are available, companies will buy them because inability to pay high compensation claims can lead to insolvency, and mere speculation about such an eventuality can hit their share price,” he said.

Mr Jeworrek added that substantial capacity can be offered only if a very large number of drilling operations are insured, since it will not be possible to provide the necessary capacity at affordable prices unless sufficient wells are insured.

“This could be achieved either through a voluntary commitment on the part of the oil companies or by introducing some form of compulsory insurance in the licensing procedure,” he added.

Munich Re said operators, generally drilling joint ventures, may be held liable for death or injury, property damage, environmental impairment and financial losses in the event of an accidental occurrence.

“Currently, there is no separate cover for drilling operations, which are insured under the individual liability policies of the companies concerned,” said the statement to announce the launch of the new scheme. “As a rule, covers are available subject to a limit of U$1–1.5 billion on the international insurance market. With Munich Re’s new concept, each individual drilling operation will be covered by a policy specifically developed for that risk. As a result, it should be possible to increase liability limits to $ 10–20 billion per drilling operation. Munich Re would be prepared to offer coverage capacity in the order of US$ 2bn.”

Mr Jeworrek added: “We have to ensure that claims are met and the environment restored to its original state as far as possible. Our concept creates an additional safety net.”

In its current form, the new concept is designed to cover drilling operations in the USA, drilling start-ups averaging 300 a year in the Gulf of Mexico alone in recent years. However, suitably adapted, it could also be used elsewhere.

Mr Jeworrek concluded: “We stand by our commitment to the development of renewable energy. In the meantime, better risk management and financial protection are needed in the field of fossil fuel generation.”