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Excess liability insurer Oil Casualty Insurance Ltd. suffered a $16.2 million in 1992, after receiving its third large loss report in its 61 years in operation.

The loss was 40 percent lower than its $26.7 million loss in 1992, a result of its underwriting loss falling by almost $10 million from $22.6 million to $12.8 million.

Premiums written increased from $18 million to $38 million, with umbrella general liability (UGL) policies premiums jumping 61 percent from $12.9 million to $33.1 million. Directors and officers policy premiums fell from $5.1 million to $4.9 million.

OCIL president Mr. K. Doyle Stephens said the increase in premiums occurred in part because of the addition of nine new participants in the company which is owned by and insures most of the world's largest oil companies.

Most of the increase was due to the introduction of a new UGL rating methodology which raised premiums but distributed them more equitably on the basis of risk.

Earned premiums increased from $11.2 million to $21.2 million while losses and loss expenses increased marginally from $33.7 million to $33.9 million.

Mr. Stephens said the main loss reported during the year occurred in April, 1992 as a result of salt dome explosion in Texas which killed three people and caused substantial property damage.

The company's general and administrative expenses decreased from $1.98 million to $1.59 million and interest expenses dropped from $2.3 million to $1.9 million. Investment income fell from $177,000 to $122,000.

Mr. Stephens said despite the net loss, the company increased its capital and surplus by $5.6 million to $155.7 million as a result of the success of its investment subsidiary, Oil Casualty Investment Corporation Ltd.

Because of the high frequency of losses experienced by the company, insurance reserves were increased from $96.4 million to $106.3 million.

Mr. Stephens said the change in the UGL rating plan reflected the strength of the company's mutual style of management.

Noting that the rate of excess liability losses since the company's formation in 1986 was higher than expected, he said: "When faced with a new set of facts and tough decisions, the shareholders acted to strengthen and preserve the long term viability of the company even at the expense of their own premiums.

"An insurance company owned by and for the petroleum industry offers a dependable hedge against a volatile and sometimes unpredictable commercial market.'' Mr. Stephens said he believed the demand for excess liability coverage will remain high.

And the company said: "The traditional energy markets for excess liability catastrophe insurance continue to contract. Lloyds syndicates in total posted a record loss of over $3 billion for the 1989 year of account. Due to Lloyd's three year accounting cycle the figures were released last year.

"Another large loss is predicted for the 1990 year. The marine syndicates which serve the energy industry have been particularly hard hit. Many Lloyd's syndicates have stopped writing new business altogether and others have been downsized or absorbed into other larger syndicates with a resulting reduction in overall capacity.

"The Scandinavian marine markets, which for years were a strong supporter of energy business, have had their capacity seriously reduced as a result of financial problems.

"It was a similar market contraction that led to the creation of OCIL in 1986. At that time, a crisis in the availability of Directors and Officers liability insurance was the driving force with general liability insurance more of a secondary concern.

"This time the excess liability are more adversely affected. It is fair to say that the excess liability market would be in considerably worse shape without the availability of substantial new capacity which was created in the mid-'80s in Bermuda through such alternate markets as OCIL, ACE and XL.

"All of these companies have helped stabilise the market. What sets OCIL apart is the understanding of and dedication to the petroleum industry. The logic of an industry owned mutual has never been more compelling.'' OCIL Thousands of dollars Premiums written 38,047 Net premiums earned 21,232 Losses 33,906 Underwriting loss 12,806 Operating expenses 3,565 Investment income 122 Net loss 16,249.