US legislators proposing an increase to the liability cap for oil spills have been warned the market lacks sufficient capacity.

Under the US Oil and Pollution Act, companies are liable up to a maximum of $US75 million ($88.4 million) per spill – a figure that hasn’t shifted since the Act was enabled in the wake of the Exxon Valdez spill in 1989.

Congressman Rush Holt has tabled legislation increasing the liability cap to $US10 billion ($11.8 billion), an act that would be applied retrospectively to the Gulf of Mexico spill.

The current cap is rendered moot should a company be found grossly negligent, but legislators believe the cap must be increased to reflect realistic clean-up and recovery costs.

Oil companies are also liable for civil penalties of up to $US1100 ($1298) per barrel leaked, or $US4300 ($5074) if found negligent.

Testifying at a congressional panel last week, Insurance Information Institute President Robert Hartwig said while the current cap is “laughable”, the industry can’t underwrite $US10 billion in capacity.

He says the energy insurance and reinsurance industry only generates about $US3 billion ($3.54 billion) in annual premiums.

Total insurance losses from the Gulf of Mexico oil spill are estimated between $US1.4 billion ($1.65 billion) and $US12 billion ($14.16 billion).