Petrobras buys $129 bln of Brazil insurance from Itau

* Petrobras to pay $106.6 mln premium for coverage

* Policy represents 5 pct savings over previous plan

* Itau, Willis coverage is for Brazilian operations

RIO DE JANEIRO, June 1 (Reuters) - Brazil's state-led oil company Petrobras purchased a $128.8 billion, 18-month insurance policy for its domestic operations, the company said in a statement Friday.

The Rio de Janeiro-based company bought the insurance from Itau Seguros, an insurance unit of Brazil's Itau Unibanco Holding SA, and Willis Corretora de Resseguros Ltda, a Brazilian reinsurance unit of Britain's Willis Group Holdings PLC.

The policy will cost Petrobras $106.6 million, 5 percent less than its previous policy, the company said.

The policy provides $125 billion of coverage for general Brazilian operational risks; $2 billion for Brazilian oil exploration risks; $250 million for general civil liability in Brazil; $235 million to insure the transportation of oil, natural gas, and petroleum derivatives; and $1 billion to insure its aviation fuels unit against damage to third parties at airports. (Reporting by Jeb Blount; Editing by Gary Hill)