US Private Equity Firm Clashes with Insurers Over Moroccan Oil Losses

Rabat – The Carlyle Group, a US private equity firm, filed suit in the United States District Court for the Southern District of New York against insurer Mitsui Sumitomo Insurance Underwriting (now MS Amlin) after the company refused to cover losses stemming from the shutdown of SAMIR, Morocco’s only oil refinery.

In August, 2015 the Moroccan government charged the company SAMIR (Société Anonyme Marocaine de l’Industrie du Raffinage) $1.35 billion in unpaid taxes. Faced with new financial struggles from the 2014-2015 oil price crash, SAMIR, which operated the refinery in Mohommedia, was forced to cease production. Before it shut down, the refinery produced 200,000 barrels a day and was an important part of Morocco’s energy sector.

In 2016, a Moroccan court ordered that SAMIR be liquidated but the company struggled to proceed and asked for several extensions for the liquidation process. As of spring 2017, several foreign investors expressed interest in purchasing the troubled refinery.

After SAMIR’s collapse, international trading firms, including the Carlyle Group, were owed more than $1 billion in unpaid debts. A subsidiary of the Carlyle Group, Carlyle Commodity Management, claimed in court documents that it had had 7 million barrels of crude and oil products stored at the refinery and that SAMIR had emptied these holdings without the notifying and obtaining the consent of the private equity firm in 2015.

In January 2016, the Carlyle Group first filed for insurance coverage from MS Amlin after concluding that the oil could not be recovered. The insurers denied coverage and in court documents explained that Carlyle was a lender and did not actually own the oil it claimed was lost and therefore was not entitled to insurance coverage. MS Amlin also accused Carlyle of not properly mitigating its alleged losses and cited this a breach of their contractual duty.

Now the Carlyle Group has taken its disagreement to court andformally accused MS Amlinof going back on its agreement to cover losses as shown in court documents cited in a Reuters report. The Carlyle Group hopes to recuperate the over $400 million in losses stemming from the SAMIR shutdown.