Energy Market Review Update 2024

The desirability gulf between risks has widened since the publication of our Energy Market Review in April, with certain areas of the portfolio such as subsea construction and U.S. lead umbrellas becoming increasingly challenging and costly to place. Insurers are all flocking to the same highly desirable placements.

Market softening is accelerating

Across the board, the message is consistent: property markets are softening.

The market has quickly forgotten the loss-making years of the past as insurers jostle for position on the best placements. Most insurers are willing to ride out the softening market in order to partner with key energy companies that will help them achieve ambitious growth targets. Where the premium pool is insufficient to sustain all of the capacity on offer, there will inevitably be winners and losers. But overall, oil and gas companies will have choice, placing them in a position of increased bargaining power once again.

Insurers are looking for income elsewhere

In an effort to meet their ambitious growth targets, energy insurers are looking to write new exposures into their portfolio, be that renewable energy, biofuel or hydrogen. This has the dual benefit of broadening their premium pool while supporting clients as they transition and expand their own portfolio. Some insurers have been quick to grasp this opportunity, seeing clearly how their existing expertise can be applied to these new exposures, however, others are approaching these risks with greater caution.

A cautionary tale from the liability market

While energy property markets are softening at pace, the story is more complicated in energy liability markets.

The international liability market was just starting to see the first signs of softening when three significant losses shook things up and yet again perpetuated rate hardening. This should serve as a cautionary tale of how quickly loss activity can change the playing field and turn a market cycle around. Despite this, capacity remains abundant and until this changes, it is unlikely that the market will see sustained significant market hardening.

Risk quality is key

While insurers are willing to negotiate on pricing, their focus on risk quality remains non-negotiable. Poor rating loses insurers thousands; poor risk quality loses them millions.

Even as market softening accelerates, this softening is still applied with a clear risk quality lens with the most preferential terms reserved for the most favored risks in the portfolio. With insurers differentiating based on both risk quality and premium volume, portraying your risk in the best possible light by showcasing well-engineered risks with thorough risk controls in place has never been more important.

Download the full report to dig deeper on the complex and evolving challenges facing upstream, downstream and liability markets, and find out how to take steps to bridge the desirability gulf.