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Survey Report

Insurance Marketplace Realities 2022 – Energy

November 15, 2021

Positive factors continue to limit the hardening market dynamic in upstream and downstream energy.

Rate predictions

Rate predictions: Energy
  Trend Range
Favored programs Increase (Purple triangle pointing up) +2.5% to 7.5%
Technical rating adequacy yet to be achieved Increase (Purple triangle pointing up) +10% to +12.5%
Offshore fixed Increase (Purple triangle pointing up) +2.5% to +7.5%
Offshore contractors Increase (Purple triangle pointing up) +5% to +7.5%
Onshore contractors Increase (Purple triangle pointing up) +7.5% to +12%
Land E&P Increase (Purple triangle pointing up) +10%
Midstream Increase (Purple triangle pointing up) +15%

Key takeaway


The hardening dynamic has eased, but ESG issues, market discipline and nat-cat losses will enable insurers to control the market — for now.


More interest is now being shown for the most highly regarded tier one programs, but losses from the 2021 hurricane season have, as of this writing, yet to be factored into current market dynamics


Positive factors continue to ease the hardening process.

  • The recent loss record continues to be much improved.
  • Even for programs where technical rating adequacy has yet to be achieved, increases are moderating due to continued profitability.
  • The premium pool has increased, in line with values and activity in the aftermath of the 2020-21 COVID-19 lockdowns.
  • Previously loss-impacted programs that had been retained/self-insured due to punitive market terms have now returned to the market.
  • Market capacity has increased, as once again there have been no major withdrawals.

However, negative factors ensure that the balance of power still lies (just) with the market.

  • The impact of the Texas freeze, recent wildfire and Hurricane Ida losses on the general P&C market is having a knock-on effect on downstream market conditions.
  • The renewed focus by insurers on ESG issues is challenging buyers, due to a lack of market consistency in approach.
  • The leadership panel remains relatively restricted, as insurers are reluctant to provide alternatives to the existing leaders.
  • Underwriter management scrutiny of the downstream portfolio remains, restricting opportunities to derive more favorable terms from the market.
  • Refining operations, particularly in North America, are under heavy scrutiny, due to named windstorm exposures and the growing ESG factors linked to this part of the business.

Insurers continue to focus on tightening terms and conditions.

  • Insurers are imposing their new testing and commissioning clause LMA5197A, which still includes the requirement for 100% testing for 72 hours but also requires the need for more information from the buyer; this ultimately means longer wait times to attach a new asset to the policy. This clause is much tighter than those that preceded it, linking from the construction risk right through to the operational phase.
  • The market is generally reverting to the use of the traditional cyber exclusion clause NMA2915A, as the new wording LMA5400 excluded the word “malicious” — this has led to some ambiguity as to the extent of the exclusion. The NMA2915 is mainly being offered to midstream companies, as traditional upstream markets compete for shares and restrict the marketing of these types of risks to the more traditional onshore insurers.
  • The new market clause LMA5515 factors in the maximum percentage of the margin of error between actual and declared values, as well as any premium adjustments. In view of the recent increases in commodity prices, it is vital for buyers to keep values up to date and accurate if the full quantum of future business interruption claims is to be paid.

The two-tier market dynamic continues, albeit with smaller increases.

  • Tier one consists of well-engineered and perceived clean, well-run risks — insurers have received sufficient payback during last two years. Although most buyers will face small increases (+2.5% to +7.5%), those that can offer a significant premium spend (in excess of say $20 million) may enjoy flat renewals, as insurers do not want to see any reduction in their premium income levels.
  • Tier two consists of programs that are still not at the right benchmarked rating and require harsher treatment (+10% to 12.5%).


Positive factors continue to limit the hardening market dynamic.

  • Capacity remains at record levels with no sign of withdrawals.
  • Resurgent oil prices have led to increased activity and higher loss of production income (LOPI) values, generating much-needed additional premium income.
  • Some insurers still have growth targets for the most sought-after business.
  • The July 1 reinsurance cost increases were more modest than anticipated, while Lloyd's overall H1 results showed a marked improvement over the previous year.
  • The overall benign loss record and profitability have been maintained — for now.

However, negative factors ensure gentle overall hardening conditions will remain.

  • Insurers worry over significant incurred but as yet unquantified losses, such as a major Norwegian LNG plant explosion, Hurricane Ida and various offshore construction losses.
  • The insurer leadership panel remains basically restricted, with limited opportunities to secure competitive terms from alternative markets.
  • PMD and company management are exerting pressure to maintain hardening momentum.

Insurers’ increased focus on ESG credentials is a worrying issue for buyers, as the long-term implications are uncertain.

  • A few insurers have their own mandates on Arctic drilling/exploration and are not writing applicable new programs — this is leading to some inconsistency in the marketplace.
  • There is still no accepted definition of the Arctic Circle, although it is reported that one is being worked on in Lloyd's.
  • It is understood that the Lloyd's Joint Rig Committee is considering a standard London market ESG questionnaire.
  • Insurers are keen to continue to underwrite this class and simultaneously maintain their own ESG credentials.
  • ESG issues are not materially affecting most programs as yet but will become a greater focus in the long term.

Commodity price increases/fluctuations are ensuring that insurers maintain a strong focus on insured values and reactivation warranties.

  • Steel prices have significantly increased, affecting the replacement costs of major upstream infrastructure.
  • The rise in oil and gas prices will continue to affect LOPI values.
  • As many rigs reactivate following an extensive lay-up during the pandemic, there is now an increased focus on reactivation warranties in the market.

The two-tier market continues.

  • Tier one consists of major exploration and production programs, smaller lease operators, offshore and onshore contractors (+2.5% to +10%).
  • Tier two consists of midstream, offshore construction and smaller/loss-impacted programs (+12.5% to +15%).


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 subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.


Business Development Director,
Natural Resources

North America Regional Industry Leader,
Natural Resources

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