Onshore Energy Conference — Dubai Onshore Energy Conference — Dubai 01 | Page 20

jurisdiction. Even within the Middle
Eastern jurisdictions, the approach taken by
the various Courts and Arbitral Tribunals
to policy interpretation can vary greatly,
for example between those which are
heavily influenced by Sharia principles
and those which are not. Caution must
be exercised by those arranging policies
to ensure that they have accounted for
these jurisdictional differences in their
policy wordings from inception.
Even when a policy has been carefully
tailored, the assured’s business needs are
susceptible to change. The onshore energy
sector in the Middle East is a rapidly growing
and changing industry and, during the currency
of an annual policy and at each renewal,
the business of the assured in question may
change dramatically. Frequently, the basis
of indemnity for a business interruption
policy was fit for purpose at inception of
the first year of account but, due to change

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in accountancy practice and/or contractual
arrangements, the original measure prescribed
for calculating a business interruption loss
can no longer be applied satisfactorily when
a loss arises. This leads to uncertainty on the
part of both the assured and the insurers.
Looking at a practical example of how
a petrochemical company may arrange its
insurance. If the company operates a refinery
and one downstream petrochemical plant
which uses feedstock from the refinery, the
company might take out one single insurance
policy covering physical damage (“PD”) and
business interruption (“BI”) losses sustained at
the insured premises, being both the refinery
and the downstream plant. Assuming the
company decides to grow its business and
builds two further downstream petrochemical
processing plants to further refine its products,
it may decide that a better corporate structure
would be to split out each of the refining
stages into separate legal entities with their