April 01, 2017
The energy insurance and reinsurance market is still witnessing price declines, despite demand having fallen significantly as primary clients reduce their costs and many underwriters operating at combined rations above 100%, according to broker JLT Group’s Lloyd & Partners unit.
The offshore and onshore energy insurance sector has been hit with difficulties as energy company clients reduced spend, new project numbers fell, commissioning of floating production and storage units slowed and energy usage continues to shift due to innovation and modernisation. Despite this, energy insurance costs have been coming down, with one of the main causes of that being the excess capacity in both the insurance and reinsurance markets.
Of the specialty lines, energy insurance and reinsurance is a target of the major global players, as well as the capital market players on the reinsurance and retrocession side, making the available capacity in the line of business one of the most extreme. Although there have been a number of big losses in the sector, the appetite to underwrite these risks at increasingly low prices continues.
Couple this with the fact that many reinsurance firms are growing into commercial and specialty facultative insurance lines and it’s easy to envisage an increasing capacity chasing energy insurance opportunities.