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P&C

Reserve-Based Lending & Insurance

Reserve-Based Lending (RBL) is a type of financing for independent oil & gas exploration and production companies.

A Reserve-Based Loan is a “borrowing-base” type of loan sized on the basis of the projected net present value of cash flows generated by the underlying oil & gas assets. The proceeds from the sale of oil & gas produced by these assets are used to repay the facility.

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This type of financing requires a strong engineering assessment of the reserves and operational capacities of the oil & gas companies concerned. The banks involved in the sector – around 40 - are increasingly facing capital, counterparty and risk country constraints, so they need to find partners capable of de-risking a proportional share of their exposure, such as political and credit risk (re)insurers.
 
A number of (re)insurers actively support financial institutions on their RBL portfolios. However, few of these have in-house expertise from the oil & gas industry itself. SCOR is unique in this respect, and consequently has a stronger understanding of the underlying risk factors associated with RBLs.
 
This new publication analyzes the key risk factors involved in this market (reserve, credit and operational risks) and the associated insurance solutions.