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Survey Report

Insurance Marketplace Realities 2023 - Energy

December 1, 2022

While there is a return to a more cautious underwriting climate in downstream energy, a major market bifurcation has developed in upstream energy.
Rate predictions: Energy
  Trend Range
Downstream property
Favored, well-engineered programs Neutral increase (yellow line, purple triangle pointing up) -5% to flat
Clean risks Increase (Purple triangle pointing up) Flat to +2.5%
Loss affective programs and dirty risks Increase (Purple triangle pointing up) +5% to +10%
Upstream property
Offshore fixed assets Neutral increase (yellow line, purple triangle pointing up) Flat
Offshore contractors Increase (Purple triangle pointing up) Flat to +2.5%
Onshore contractors and smaller E&P programs Increase (Purple triangle pointing up) +2.5% to +5%
Midstream Increase (Purple triangle pointing up) +10%
Subsea offshore construction Increase (Purple triangle pointing up) +20%


A downturn in the loss record has halted the recent softening process in the market.

  • Recent losses reported suggest an overall loss total of approximately $4 billion to date for 2022.
  • While this figure would not be sufficient to ensure overall unprofitability, the final loss total for the year may result in portfolio losses for many insurers.
  • These losses have been across all the major downstream occupancies and across all geographies.
  • Midstream losses have been heavy, which may affect overall capacity and market appetite for this sub-class.
  • The losses have caused a major retrenchment in the market, with written lines being reduced and competitive pressures easing.
  • Those insurers who had begun to compete with the existing leaders have once again elected to retreat, leaving leadership options generally as they were at the beginning of the year.

Global inflation rates have left insurers concerned that current valuations may not be accurate.

  • Insurers are looking at tightening the LMA 5515 volatility clause, reducing the percentage cap on both monthly and annual variations in what is declared by the buyer to their program.
  • Given the frequency and severity of fossil fuel price spikes in recent months, buyers are now left with the challenge of estimating the correct values to declare at a time of great uncertainty.
  • During the pandemic, buyers have been used to simply indexing figures from 2019, but most insurers are not going to find this approach acceptable going forward.
  • Global refinery business interruption values are likely to come under further scrutiny, given the multiple increases in commodity prices during 2022.
  • Where insurers are not comfortable with the reliability and accuracy of the valuations presented to them, they are likely to respond with a more cautious approach to the program in question.

Insurers continue to focus on ESG, but market inconsistencies remain.

  • Several downstream companies are owned by mega corporations that also own power companies that use coal-fired plants. These companies have had to face a withdrawal of support from various insurers, particularly those from Western Europe.
  • The term ESG is now being questioned by some, as some inconsistencies among the constituent parts of the ESG framework are becoming apparent.
  • This may be accentuated by the revised focus on fossil fuel production to alleviate the projected energy crisis in Europe and elsewhere in the months ahead.
  • There is therefore still no consensus of approach across the market, making the navigation of the options available to buyers particularly challenging.

There is still little or no challenge to existing leaders from other areas of the market.

  • While there have been some new entrants to the market, they have generally been significantly impacted by the recent loss record deterioration.
  • As a result, there is a now a general reluctance to challenge existing market positions and leadership options.
  • Brokers are therefore finding it more challenging to generate further competition into this market.

Buyers continue to experience a three-tiered market.

  • Tier one consists of well-engineered and perceived “good” clean well-run risks; reductions of up to 5% are still available.
  • Tier two consists of programs featuring less premium income, but which still can show clean loss records, the range for which is now flat to +2.5%.
  • Tier three consists of loss-affected programs where rating increases of between 5 to 10% are still being applied.


There is an increasingly significant bifurcation developing in the upstream market.

  • Realistic capacity for the least sought-after programs has now constricted, despite the abundance of capacity for the most attractive risks.
  • Insurers are increasingly withdrawing from non-renewable, attritional business, such as one well programs, small land rig fleets and sub-sea construction business, which has proved not to be profitable in recent years. Brokers’ ability to complete some of these placements is becoming increasingly challenging. This will be exacerbated by Munich Re Syndicate 457’s withdrawal from this market in 2023.
  • Meanwhile, capacity for the most attractive business remains plentiful, with no sign of any withdrawals; realistic capacity continues to stand at some $7.25 billion for these programs.
  • These include fixed offshore assets, global upstream programs, well-engineered risks, and those programs that remained faithful to their existing market leader. The common denominator is the prospect of significant premium income.

Recent midstream losses are also causing the market particular concern.

  • There has recently been a series of midstream losses, especially relating to LNG assets, which have traditionally been underwritten by the downstream market, but which are also written by a selection of upstream insurers.
  • This has surprised upstream underwriters, as previously this business had been regarded as relatively low risk.
  • Capacity is therefore becoming scarcer for this business, and rating levels are increasing.

Global inflation is also presenting significant challenges to the upstream market.

  • Underwriters are concerned that so few programs have been independently valued in recent years, although credit is being given in the market if buyers can prove that they have considered the impact of inflationary factors in their underwriting submissions.
  • Insurers are increasingly concerned about their loss of production income (LOPI) exposure due to supply chain issues leading to increased lead times to replace damaged equipment.
  • Global inflation is also undermining the value of current deductible levels, which have continued to remain at roughly the same levels for the last five years.
  • Where insurers are not comfortable with the valuation data presented to them, this is reflected in the negotiations.

Natural catastrophe risk remains a concern as reinsurance terms and conditions tighten.

  • Insurers are having to pay increased prices for their natural catastrophe reinsurance protection.
  • As a result, they are under pressure to maintain or increase pricing levels to ensure they can continue to afford the reinsurance protection required — regardless of the actual location of the risk.

While the outlook for smaller business still looks challenging, a greater degree of market competition is expected for the best business in 2023.

  • Insurers are looking to replace premium income lost due to the conflict in Ukraine with increased participation on the best-regarded programs.
  • This has resulted in a significant degree of over-subscription in these programs, with underwriters disappointed by the reduction of their actual signed lines.
  • This in turn has created challenges for these underwriters, given the premium income targets set by their senior management.
  • We therefore anticipate that additional competition is likely to be generated in 2023, as those insurers who are not traditionally acknowledged as market leaders seek to challenge the current status quo by competing more aggressively to achieve enhanced premium income targets.

As a result of the market bifurcation, a multi-tier market has now developed.

  • For E&P programs featuring significant premium income, flat renewals for this business remain the norm, although reductions can sometimes be achieved for the most sought-after business.
  • Offshore contractors’ rates are now flat to +2.5%.
  • Onshore contractors and smaller E&P programs now attract rises of between 2.5 to 5%.
  • However, midstream program rating increases now average 10%, with even higher increases (approximately 20%) for subsea offshore construction business.
  • Programs with unfavorable loss records may incur even higher rating increases, in contrast to the increased appetite for “clean” business.


Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).


Business Development Director,
Natural Resources

Paul Chirchirillo
Head of USA Energy Broking,
Natural Resources

Natural Resources Industry Vertical Leader, North America, WTW

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