By Erik Holm and Siobhan Hughes Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- The amount of pollution insurance that oil companies will be able to purchase may fall by 15% or more because of the spill in the Gulf of Mexico, brokers who arrange the coverage told a group of U.S. Senators. At least one major energy liability insurer has already decided to cut back on the amount of coverage it will offer to individual companies by a third, and prices for insurance protection are likley to increase significantly, wrote Lloyd & Partners Ltd., a London broker, in a letter about the availability of insurance in the wake of the April accident. John Lloyd, the chief executive of the brokerage, predicted "pressure from both sides of the supply-and-demand equation as capacity shrinks and demand for higher limits materializes." The brokers provided their analysis this week as a handful of Senate Democrats proposed raising the cap on damage claims that BP Plc (BP) must pay for the Gulf of Mexico oil spill. One broker, Houston-based Alliant Insurance Services Inc., warned that increasing the liability limit would prevent operators in the Gulf from obtaining adequate insurance protection. The current limit under the U.S. Oil Pollution Act is $75 million. "In our view, only major oil companies and National Oil Companies will be financially strong enough to continue current exploration and development efforts" if the cap were raised substantially, wrote Benjamin Wilcox, an executive vice president at Alliant. Republican Senators led by Lisa Murkowski (R., Alaska) blocked the attempt to raise the liability cap this week. BP has been scrambling to stop oil from spilling from a well a mile below the surface since the deadly oil-rig explosion on April 20. BP officials have declined to estimate the extent of costs associated with the spill. Earlier this week, Lamar McKay, the head of BP's U.S. unit, said the company would pay all "legitimate" claims related to the spill. He said that "claims have to have some basis." -By Erik Holm, Dow Jones Newswires; 212-416-2892; erik.holm@dowjones.com
