Insured losses from the oil spill enveloping the Gulf of Mexico are expected to reach $US1.5 billion ($1.65 billion) as British-based oil giant BP struggles to contain the ruptured well.

The Insurance Information Institute (III) estimates insured losses at $US1.4 billion ($1.54 billion).

Comparisons are now being drawn between the destruction of the Deepwater Horizon rig at the BP site and the Exxon Valdez oil spill in 1999, which resulted in clean-up costs of $US2.5 billion ($2.76 billion), and fines and penalties totalling $US1 billion ($1.1 billion).

The most expensive oil rig loss in history is the explosion of Occidental Petroleum’s Piper Alpha facility in the North Sea in 1988, which killed 167 workers and incurred insured losses of $US3.4 billion ($3.76 billion) in 2009 dollars.

“The insurance losses from the sinking of the Deepwater Horizon will be significant and one of the largest losses ever for global offshore energy insurance and reinsurance markets,” III President Robert Hartwig said.

“The risks inherent in carrying out such a complicated endeavour, however, are well-syndicated, with the insured loss spread across a broad spectrum of insurers and reinsurers on a global scale.” 

Dr Hartwig says BP’s use of captive insurers is significant for an event of this kind.

“This fact, along with the possibility that some parties could eventually exhaust the limits of their insurance coverage as losses mount, means a substantial share if not the majority of losses could be financed by the Deepwater Horizon project participants themselves, through their existing in-house resources,” he says.

Last week, Deepwater Horizon owners Transocean said the rig is insured for total loss coverage and wreck removal of $US560 million ($605.5 million).