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Carlyle sues insurers over Moroccan oil loss

  • Publish Date: Posted about 7 years ago

US private equity firm Carlyle Group is suing a group of insurers that includes a number of Lloyd’s carriers over $400mn worth of oil it claims it lost when Moroccan refinery Société Anonyme Marocaine de l'Industrie du Raffinage (Samir) collapsed in 2015, court documents show.

In a suit filed in the United States District Court for the Southern District of New York, Carlyle Commodity Management, a subsidiary of Carlyle Group formerly called Vermillion Asset Management, said it had about seven million barrels of crude and oil products stored at the Moroccan refinery in 2015 before the state halted its operations.

In the court filing, Carlyle claims that underwriters, led by Mitsui Sumitomo Insurance Underwriting (now MS Amlin), have gone back on their obligations by declining to cover the losses, according to a report by Reuters on the court documents.

However, insurers argue that Carlyle's position in relation to Samir was as a lender and not as an oil supplier since the group never actually owned the oil it claims was stolen.

As such, they argue the losses allegedly suffered by Carlyle fall under the definition of an uninsured credit loss due to the refinery's failure to repay the amounts advanced to the sellers of the oil.

The insurers also allege that Carlyle breached its contract by not notifying the underwriters of payment problems.

The refinery was shut down in August 2015 after the Moroccan government imposed a $1.35bn unpaid tax bill on Samir and froze its accounts. This came as oil prices crashed from mid-2014, significantly reducing the value of oil Samir bought and held in its tanks for refining purposes. Carlyle says that during 2015 Samir emptied the tanks without its consent.

Carlyle filed the first request for cover to its insurers in January 2016 concluding that the oil could not be recovered.

In late February this year, Carlyle's insurers denied any cover, leading Carlyle to launch a lawsuit against the underwriters in early March, according to the court documents.

The claim relates to both primary and excess layers of coverage, with respective maximum limits of $250mn and $350mn.

MS Amlin is the lead insurer on the primary layer of the marine cargo claim, while the excess policy is led by Ascot Underwriting Syndicate 1414.

The other Lloyd's insurers subscribed to the excess layer are Axis, XL Catlin, MS Amlin, Chaucer, Travelers, Atrium, Ark, Markel, Beazley and Cathedral.

The case continues.