Energy

Emerging Issues (Upstream, Midstream and Downstream)

  • The focus on Environmental, Social and Governance (ESG) issues is growing. The industry is facing increasing investor demands and expectations for change.
  • Political scrutiny and environmental regulation is escalating across all sectors.

  • Project costs continue to increase due to labor and material delays.

  • Cyber threats are proliferating, drawing enhanced awareness and focus by top management.
  • Access to capital is an area of growing focus amid ESG concerns within global financial and insurance markets.

  • Challenges related to acquiring and retaining a talented, experienced workforce continue.

  • Energy transition and the growing commitment to lowering carbon emissions across sectors is bringing in non-traditional investment in infrastructure projects and new operational technologies.

  • The industry continues to consolidate through merger and acquisition activity.

Insurance Market Conditions

Rates

  • Property rates are stabilizing. While increases continue across many sectors; they have decelerated. Current rating levels are viewed as more closely satisfying technical rate requirements.

  • Primary Casualty remains competitive (aside from Auto Liability) while Excess Liability rates are stabilizing.

  • Environmental Liability pricing remains competitive, with nominal rate increases across all sectors.

Undewriting Appetite

  • Insurers are generally looking to increase their share - deploying greater capacity where in the past they have pulled back. The increased focus on non-traditional energy is creating more capacity demand.

  • Underwriters are showing a willingness to consider multi-year relationships.

  • Meaningful credits for changes in retentions are beginning to surface.

  • With fewer capital projects in the pipeline, there is increased competition for them.

  • Depending on industry sub-sector, insurer appetite varies.

Capacity, Limits, Deductibles & Coverages

  • Available capacity is increasing and is at adequate levels for the majority of buyers.

  • Coverage restrictions are not generally being applied accross-the-board; only on a case-by-base basis.

  • Required base level retentions are increasing, which is aligned with shifting buyer preferenes to accept a larger share of the risk to manage premium costs.

  • Natural catastrophe capacity remains restricted but improving; GOM Named Wind capacity is static.

What to Expect at Renewal

Upstream

  • Modest Control of Well and Property rate increases are expected for well-performing insureds, with more significant increases expected for risks with a more challenging loss history.

  • Casualty rates are expected to stabilize across Primary and Excess while Auto will be more challenging.

  • New capacity is expected to flow into the market for Environmental/PLL, serving to stabilize pricing.

  • Underwriting will continue to become more rigorous, with increasing requirements for more detailed risk engineering and asset profiling.

  • GOM Named Windstorm capacity is expected to continue to contract for the next wind season.

  • With a focus on satisfying ESG demands, insurers will continue to rebalance risk appetites in favor of clean(er) energy, taking smaller shares of risk.

Downstream & Midstream

  • Property/Business Interruption rates are expected to continue to stabilize and trend downward, with price increases in the single digits for desirable risks.

  • Casualty rates are expected to generally stabilize, with flat pricing expected on Primary, nominal increases on Excess, and more significant increases for poor performing risks.

  • There will be a renewed focus on quality and accuracy of physical damage and business interruption values. Global supply side issues post-COVID-19 have the potential to increase unit prices and lead times for critical equipment depending upon jurisdiction.

  • Scrutiny of contingent business interruption exposure is expected to increase, with limitations more frequently imposed on direct named/unnamed suppliers.

  • Insurer focus will heighten on ESG practices and strategies. It will become common for insureds to proactively present their corporate practices in submissions and investor/market presentations.

  • Attention on cyber system capabilities and protections will increase.

  • Limitations on Cyber coverage in Property and Casualty programs are expected to become the norm.

  • The industry will experience heightened pressure for third party climate change coverage restrictions and PFOS/PFAS pollution exclusions.

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