Munich Re has responded to the Gulf of Mexico oil spill by offering cover for individual drilling operations.

It will now create cover for $US10 billion-$US20 billion ($10.5 billion-$21 billion) for each drilling operation being run by a company.

There is currently no separate cover for drilling operations, which are insured under the individual liability policies of the companies involved, with covers limited to $US1 billion-$1.5 billion ($1.05-$1.58 billion).

Limits of between $US1 billion and $US1.5 billion have been the norm on the international insurance market.

Munich Re Reinsurance CEO Torsten Jeworrek says he is convinced there will be demand for this type of cover.

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

Munich Re says this increased cover can only be offered if a very large number of drilling operations are insured.

“It will not be possible to provide the necessary capacity at affordable prices unless sufficient wells are insured,” Mr Jeworrek said.

Drilling start-ups have averaged 300 a year in the Gulf of Mexico alone in recent years.