After a decade of falling prices, the energy insurance market has stabilised at a very favourable level for buyers.
Large operational and natural catastrophe losses destroyed any chance of profitability for the energy market last year – downstream losses are expected to reach $5 billion for the 2017 year: far in excess of the market’s net written premium of circa $1.5 billion.
While last year was benign for the upstream market, years of premium erosion mean that margins are now razor-thin.
In such a market, logic dictates that prices should be rising but capacity remains abundant. Larger accounts are typically renewing as expiring or with single-digit increases, although some loss-affected business has experienced double-digit price rises.
Amazingly, smaller accounts that do not require large amounts of capacity are still able to achieve reductions in the property and casualty markets.
Certain products are beginning to firm up. For example, we are seeing some price increases in the D&O and cyber arenas.
The silver lining for insurers is a much-needed renaissance in the offshore energy market.
With the price of oil now around $70 per barrel – almost double a year ago – there are signs of life emerging from the offshore industry, a key source of premium and profit for energy insurers.
Emerging risks in energy insurance market
There is also growing demand for innovative risk transfer solutions for emerging or growing risks, including cyber, contingent business interruption and environmental liabilities in developing markets.
One of the biggest challenges for the energy insurance market is to find the right solution for cyber.
With high-profile losses, awareness of potentially catastrophic cyber exposures is growing and energy companies are showing much more interest in insurance solutions for this emerging class of risk.
However, there is a view that part of the solution must come from the energy insurance market and that a proportion of existing premium could be used to craft a degree of cyber cover.
For more information contact Jim Pierce, Global Specialty Head, Energy, Power & Mining on +1 713-325-7619 or email email@example.com.