Willis Towers Watson today launched its Energy Market Review for 2018, stating that the downstream energy sector suffered its worst loss record for nearly ten years. However, despite this and the impact of 2017’s Gulf of Mexico hurricane season – one of the worst this century – all areas of the energy insurance market remain relatively stable, largely due to continuing availability of capital in the marketplace.
Key insurance market findings from the Review include:
• Capacity: once more, capacity has crept up in both the Upstream and Downstream Property markets, to US$7.95 billion for Upstream and US$6.8 billion for Downstream.
• Losses: Upstream has had one of the most benign loss years on record in 2017 (under US$1.3 billion according to our database); however, the same can hardly be said for Downstream, which has had its worst loss year for nearly 10 years (over US$5.5 billion).
• Rating levels: While the year on year broad decrease in rating levels of recent years has finally been brought to an end for most buyers, the overall upswing in rating levels has been small in both markets, with modest increases being negotiated for the majority of programmes.
• Profitability: Upstream portfolio appears to have benefitted significantly from the 2017 benign loss record and remains generally profitable. However, the outlook for Downstream insurers is much less promising, with few recording a profitable year in 2017.
Neil Smith, Head of Natural Resources P&C at Willis Towers Watson, commented: ““Looking back at the terrible hurricane season in 2017, we can now say with some confidence that the apprehension felt by many energy insurance buyers in the immediate aftermath of these hurricanes has to a large extent been unfounded. Despite the 2017 storms producing well in excess of US$75 billion of insured losses, the turnaround in market conditions has been much more modest in comparison to other major events of the last decade.
“We recognise that insurers now have to consider whether to continue to invest heavily in these portfolios or to scale back to wait for better conditions to materialise. Both options carry risks, which suggest that the outlook for the energy insurance markets remains an uncertain one.”
A link to the report can be found here;