PRT: associated party transactions - insurance - information
It will normally be necessary to obtain a copy of the captive’s accounts and a full and detailed explanation of the insurance arrangements.
The following is a list of the information which it is suggested should be obtained or assembled when, with a possible restriction under OTA75\Sch4\Para2 in mind, it is decided to review the insurance arrangements of a company which has effected cover either directly or indirectly with the captives.
- Name of captive insurance company.
- Direct (AB) or indirect (ACB) route employed?
- Premiums paid -
* assemble comparative data covering say 3 or 4 years; * distinguish period of construction if appropriate; * obtain explanations of large variations from one period to next; * express rate as percentage of asset value.
- Property covered - e.g. platform, other offshore plant, pipeline, stores etc.
- Risks covered - e.g.
* physical loss/damage, noting any limitations; * terrorist activity; * loss of profits (premiums not allowable).
- Limit of liability overall.
- Excess borne by producing company?
- Excess borne by captive?
- Level of asset cover - replacement value subject to maximum?
- Construction period - insured with different company to that after production started? Note - a captive insurance company is often brought into play only after construction is completed.
- Any evidence obtained of arm’s length premium quotations during enquiries on insurance placed with the captive may be useful in terms of general information on the subject - although we are of course concerned with costs and not market rates under OTA75\Sch4\Para2.
- A copy of the overseas captive’s accounts.
- Is Oil Insurance Ltd involved? This is a Bermuda based oil company “cooperative” - (see OT14840).
- The basis on which premiums have been allocated to North Sea assets, and in particular to PRT paying field assets.