Global Insurance Marketplace Insights Q1 2026 – Natural Resources

MARIA REITER: Hello, and welcome to the Marketplace Insights podcast series, where we discuss the current state of the energy market. I am Maria Reiter, Head of Global Broking Strategy for Natural Resources, and I'm delighted to be joined today by Rupert McKenzie, global leader of Willis natural resources, and Mike Newsom Davis who is our global head of liability and head of Downstream GB.

This podcast follows the launch of our recent energy market review, where we explore the global upstream, downstream, international liability, and North American casualty markets and discuss how softening trends could evolve throughout the year. If you'd like to read the full review, please search for, energy market review 2026 on our website, wtwco.com.

After another year of historically benign loss activity, softening market conditions across the upstream portfolio show no signs of abating. Capacity is still climbing, and insurers are under pressure to grow their market share. In GB, we're seeing the pool of available premiums shrink further as a result of client mergers and acquisitions. This is increasingly leading to a lack of market discipline, as insurers are competing fiercely to maintain or improve their position on the most favored placements. Rupert, how is that playing out globally?

RUPERT MACKENZIE: So it's playing out globally with incredibly favorable conditions for clients. We are seeing regional markets now competing aggressively against the London upstream market, and wherever there is capacity, there is a fight for market share and positioning on accounts. And so that is driving continued softening across the upstream space, and for the time being, we see no end in sight.

There is such a plethora of global upstream capacity, even in challenging regions, even for more technically challenging risks. There is enormous appetite, and clients are being incredibly well served by the market, who are deploying capacity at almost a frightening rate. I mean, if you look at the rate reductions that we saw in 2026, in some geographies, there was an intense competition for market share, and markets really competing very aggressively against each other to get themselves in meaningful positions on the larger upstream accounts.

MARIA REITER: Do you see that across the whole portfolio of the upstream risks, or do you find it centers in certain regions or in certain types of risk?

RUPERT MACKENZIE: So there's obviously a scale part of it. So there are some programs that where you might have a local national oil company who has a considerable amount of offshore projects, those types of clients are going to be very attractive to the market, because they will see if they can secure a lead position or an important position on that client's operating policy, the opportunity to leverage that for future project risks.

And obviously, it is in the offshore construction space that really where the new premium is coming into the market. And so, on risks where there is the potential for ongoing project work. That's where we're seeing the most activity. And it's not particularly regionally dependent. It's really around where we're seeing ongoing continued activity and where markets think there's an opportunity to align themselves with the client, which will in turn lead to future revenue.

MARIA REITER: That's really interesting. And I think we're seeing something quite similar in London, where we feel the pool of actual renewing premium is now in the region of a billion, above a billion potentially. So actually, that construction premium is increasingly becoming important to the market to make their growth targets.

RUPERT MACKENZIE: Absolutely. I mean, I think it's the construction premium that will make or break an underwriter's budget this year, as it did last year. Those markets who can get a good share of project risk will likely get closer to their budget than those markets who are only really able to get operational risks will really struggle. And certainly, if they've got growth ambitions, they will really struggle because, as you said from the outset, we're talking about a shrinking premium pot on operational programs.

MARIA REITER: Absolutely, Now if we move on to the downstream market, the loss picture here looks rather different to upstream, with about 6.8 billion of losses in 2025 and further losses already sustained in 2026. You'd be forgiven for thinking that downstream rates are going to rise. However, that downstream market seems to be defying gravity, really, with rates to falling between 10% and 20% driven by increased capacity, increasingly ambitious growth targets, and a developing challenge also from markets, particularly in the Middle East, to some of those established London leaders. So Rupert, are you seeing those same kind of softening trajectories still globally in the downstream market?

RUPERT MACKENZIE: I think we are. I mean, there's obviously some spots where the softening may not be as extreme as in other places. There is a limited amount of regional variation. But to me, this is a great example of how the natural resources downstream energy sector sits within the macro picture of the insurance market at large. And so on its own, downstream did not make money last year.

And so as you say, it would make all sorts of logical sense for rates to start to move in the downstream place to keep a pace with loss activity. But the reality is downstream sits within the broader insurance industry, and the broader insurance industry at the moment is awash with capacity. The market as a whole, across pretty much every single sector with very few exceptions, is in a soft phase, and there is no belief within the underwriting fraternity that clients or the market would have the appetite to stomach rate increases at this stage, even on a loss making portfolio.

So it is something of an anathema where clearly underwriters lost money last year and may well lose money again this year, but there is nothing at this point in time that is slowing the continued softening. Now, I'm sure we'll come to this at some stage. Does this mean that losses aren't going to be able to change market dynamics? I don't necessarily think that is the case, but I think it's a combination of losses and other factors that maybe we'll get to later on in this discussion.

MARIA REITER: Absolutely, it's so interesting. And Mike, when we're looking at the energy casualty market, we know the US tends to be a bit of an outlier here. But can you delve a little bit deeper into the global picture on the energy casualty market for us.

MIKE NEWSOM DAVIS: Thanks, Maria. Well, I think first of all, like Rupert said, and I'd echo that, it's overall, it's good news for clients for liability because we're long tail, I guess. Movements tend to be more dampened. We get kind of excited if the rate has gone up or down by about 5% or so. So it's a smaller magnitude of change. What we're seeing is basically rate movements improving across all sectors.

The US you mentioned is an outlier-- that's correct-- and really just driven by social inflation, which is a global phenomenon but most prevalent in the States. US jury awards-- there's commonly known phenomena of nuclear and thermonuclear verdicts in the States, being those of jury awards over 10 million and 100 million, respectively.

Those continue to increase, and in fact, the median jury award in the States was 21 million for large, large awards, 21 million in 2000 and 2020. It's now over 51 million. So we're seeing a continued increase in the average size of large awards and also frequency, particularly in the auto liability space. Social inflation and claims results in the States remain a concern. However, the good news is that there's more capacity around, certainly on the excess layers, London markets competing for US accounts too, so there's a reasonable amount of competition.

Long story short, I would say for US, we're still seeing increases but more moderated than before. As a generality, I'd say flat to single digit increases, but probably double digit for auto. So still some increases because of the jurisdiction, but not as severe as before. When people ask me what's the average rate increase for liability, it really depends on the region. And in the energy market review, we've described it as a kind of journey into a department store-- where I promised not to mention Charles Dickens this year-- because it was a tale of two jurisdictions, which is still appropriate.

But basically, we've got a series of escalators, and they're all moving downwards at different rates, apart from one in the building, which is US casualty that we've discussed, and it's going up, but at a more moderated pace. For the other escalators, that they really define, and it depends on territory and the jurisdiction. So I said good news is for international business, it's an improving picture too, and we're seeing probably default. Last year was flat. We're now seeing some reductions across the board, but at different rates.

The underlying considerations, global capacity is up slightly. The realistic total global capacity is $3.2 billion. Realistic capacity, which is the realistic capacity under ICE will deploy on any given risk, has gone up a little bit to just shy of $1 billion, about 950. So it's a little bit more.

I think the key thing, though, is there's more competition. Some of the major insurers have cut back their individual line size because they're worried about that exposure to the US casualty claims. But we've seen an influx of newer markets, particularly MGAs and other small to medium sized markets, putting out more capacity. So essentially there's more competition.

We've also seen the rise in the last two or three years of the strength of the regional market. So certainly in regions such as Canada, Australia, Latin America, Middle East, there's a lot more local capacity. So what this means is, if you're placing small to moderate size accounts locally, there's a lot of competition, and the rates are dropping off quite markedly.

Conversely, if you're placing a large international account with big limits and you need to access the international markets, you're still seeing rate reductions, but at a more moderate rate. So for US, we've talked about flat to probably low single digit, for large European and international business with large limits, say 200 million, up to a billion or so. You're seeing rate reductions, but starting at flat to low single digit.

Canada and Australia, the escalator is moving down more swiftly. We're probably seeing high single digit reductions where we're seeing the biggest increases, almost to the exciting level of Rupert's property, probably accounts with small, small limits placed in regional markets, particularly those in the Middle East, where we're seeing, I'd say, double digit reductions.

MARIA REITER: So is it really the amount of capacity that needs to be deployed. That's the driving factor at the pace of the escalators going down, or are there any other considerations that are driving the difference between the different segments?

MIKE NEWSOM DAVIS: It's essentially it's the level of competition available. So obviously, if you're buying, say, 10 to 25 to 50 million limit and you can place it all in the local market, there's a lot of local appetite there, and there's a lot of competition. So you might see maybe a primary layer placed locally very, very competitively at some stage, be it 25 million or 100 million or 150 or 200, you need to access the international market.

They are still competing, but they're probably slightly more moderated reduction. So it really depends on what limit you buy, also where you're based. I guess the other consideration is jurisdiction. Swiss Re have conducted a number of studies to look at the spread of social inflation globally. Clearly, the most exposed is the US because of social inflation there and the average level of awards-- jury awards, et cetera.

Second on the agenda would be Europe because of increases in exposure there. They've got a new European products liability directive, which is coming out at the end of December 2026, which redefines products, reduces the burden of proof and facilitates class actions. So what this means is that the spread of social inflation varies throughout the globe. But I would say second only to the US is Europe. But we're also seeing certain other territories such as Australia, where a level of awards are increasing.

So to your point, Marie, it depends on the local market competition. It depends on the limit, but it also depends on jurisdiction. So average level of awards in Europe are currently higher. They're less than the states, but they're higher than the Middle East and Far East. So that will affect underwriters approach to rating, as well.

MARIA REITER: Thank you. I'm sure our listeners are absolutely eager to hear your answers to probably the most burning question on everyone's lips. What is it going to take for this market to finally change from the softening trajectory we've been seeing for several years now? Maybe if I go to you, Rupert, first.

RUPERT MACKENZIE: Thanks, Marie. I mean, yeah-- crystal ball time. I suspect that what will change the market dynamics, it won't be a loss. It could be, I mean-- we might see a catastrophic hurricane season or some other major, either industry, operational or natural catastrophe events that could change market dynamics. But my suspicion is it will be something else. It will be something that changes the amount of capital that is available to come into the market.

So some form of capital changing event-- what that might be, I don't know-- but I suspect that will be ultimately what changes the market dynamics. We are blessed at the moment with continued interest from a number of supply sources of investing into the insurance markets. We're seeing that in the number and volume of MGAs and MGUs that are popping up around the marketplace in all sorts of interesting and diverse sectors.

So there clearly is an excess of capacity with appetite to come in to find some form of insurance avenue to generate revenue. And so I think until such time there is a redeployment of that capital into other areas, whether it's because investors see other more attractive areas or there is something that causes a reduction in investor confidence that causes a retraction of available capacity-- I don't what that's going to be-- but I suspect it will be a capital changing event that changes the market dynamics.

MARIA REITER: Thank you. And finally, Mike, what is your view? Is it a capital changing event, or can you see anything else that might move the market?

MIKE NEWSOM DAVIS: Well, first of all, I'm going to use another analogy, if I may, Marie. In nautical terms and in nautical terms, I would compare the liability market to a marine tanker versus Rupert, who's the captive of a speedboat. And what I mean is that the property, because it's short term, is more flexible and you tend to see movements more rapidly. Liability, by its nature-- and it takes a while for capital to come in and come out. Certainly, if you're putting together a captive, liability is often one of the last things on the agenda because of long tail losses, the need for reserving. As a function of that, movements tend to take longer and as I said, are more muted.

However, there are probably a number of factors that could change the market. And I'd say there's three key factors-- some of them really echo what Rupert said three factors, two slow and one fast. The first slow one is deterioration profitability. We've seen from the Lloyd's issue their Lloyd's results for casualty on the 19th of March, which are always useful. Slight caveat because they tend to bundle certain other sectors, including D&O, into the pure casualty bucket.

But for the first time in three years, casualties just slightly skipped into the red, so it's no longer as profitable. The combined ratios are just over 100-- I think it's 100.6% So after two to three years-- three years-- of positive profitability, slight Warning sign that it's no longer profitable, that's fine. If you can sustain that with income from your investments.

So which moves on to the second point, I guess, which is-- and again, Rupert alluded to capital changing events-- so basically macroeconomics, interest rates. We've seen them come up, but there's probably around 4% give or take. If we see a reduction in interest rates, it means that it's harder for insurers to subsidize a lost book in terms of income. So I think deterioration in profitability and macroeconomic consideration and interest rates will have a longer term effect.

The third one is a shock loss, which, as Rupert said again, will be harder because basically you need a series of losses to turn the market. But we did see it back in probably 2019 in the mining liability sector, where there were two, a couple of major losses in Latin America-- two dam failures, San Marco in Brumadinho-- and after that, we saw quite a significant contraction in liability capacity, which led to tightening up of underwriting and rate increases. That was quite a specific sector.

The energy is a broader sector, but if we see a number of, guess, shock events like that, it's possible that it could cause a full stop and a pause on the market. My view is, in the absence of anything, we see probably a continued but moderated softening. I don't see any change in the needle this year.

So I think possibly at the end of the year, when insurers start to compete for income and they're realizing that they're slightly short of their budgets, we might see a slight uptick in competition. I don't see any great changes this year sooner or later. And you refer to the markets defying gravity-- I think the same will apply to casualty-- but I don't see that yet.

MARIA REITER: Thank you. Rupert, Mike, thank you so much for your contribution to this episode of the Marketplace Insights podcast. See you in the next one.

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