Petrobras to Renew Insurance Contracts, Aims to Pay Less

Brazil's federal energy company Petrobras (NYSE: PBR) has begun the process to renew its insurance contracts, a Petrobras spokesperson told BNamericas, confirming local press reports.

Although the company's assets climbed 20.3% to US$45.7bn last year, Petrobras aims to pay less for its insurance coverage this year than it did in 2005, local financial daily Gazeta Mercantil reported. Last year it spent US$24mn to insure US$38bn in assets.

"We are going to present one package, both national and international, to lower the price due to our size," the paper quoted Petrobras director of financial planning and risk management Jorge Nahas as saying.

Coverage for oilrigs has risen in price since last year after hurricanes in the Gulf of Mexico caused significant losses to the oil sector, but Petrobras does not believe those price hikes will affect its negotiations.

"We will argue that we are out of the danger zone, which certainly will be taken into account, and we will show them how we have invested in safety," Nahas was quoted as saying.

The deductible on the current contract stands at US$20mn and Nahas was reportedly said the company is considering whether to raise this to get a better price on its new insurance contracts.

Along with executives from Petrobras, the negotiations taking place in London include individuals from federal reinsurer IRB Brasil Re and UK broker Willis (NYSE: WHS), the spokesperson said.

The new contract must be signed by June of this year, according to the paper.

The company's D&O policy will not be part of the new insurance package as it was renegotiated in November last year with Unibanco AIG Seguros & Previdencia with US$100mn coverage.

Petrobras reported net profits of 23.7bn reais (US$11.1bn) last year, up 40% from 2004.

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