Insurance Marketplace Realities 2026 – Energy

Losses in the refining space in Q2 2025, paired with losses in Q1 have slightly tempered the pace of market softening, but haven't proven to be enough to change the prevailing softening trend.

• Notable energy property loss events have occurred in the refining sector in January, February and June of 2025 in Germany, California and Texas.
• Maintenance, turnaround and contractor selection and utilization practices continue to be areas of focus for insurers, particularly in the refining space, which has produced an outsized share of recent losses.
• It is estimated that energy market events thus far in 2025 could total more than $5 billion, representing a significant increase in activity compared to the benign outcome in 2024, which totaled approximately $1.5 billion (estimated $4 billion in downstream market premium).
• Despite losses early in the calendar year, underwriter behavior hasn't changed significantly enough to reduce competition in the market and change the market trajectory.
• The 2025 Atlantic Named Windstorm season has begun and hasn't produced significant events to this point, but the most potentially active months remain ahead and could impact the market should wind losses occur.

New capacity entering the energy property market has been modest through the first half of 2025, but Gross Written Premium (GWP) goals loom large as year-end approaches

• With rates continuing to fall through the first half of 2025, GWP growth goals set in late 2024 may be more challenging to reach as premiums decline.
• As year end approaches, underwriters may feel pressure to increase shares and write new business to replace lost premiums in hopes of reaching GWP targets for 2025.
• If more losses in the sector don't occur as the year comes to a close and the market's trajectory remains on current track, rates could continue to fall, perhaps more rapidly than at mid-year, as underwriters chase premiums and escalate competitive pressure.
• Competition will continue to benefit Tier 1 risks the most as underwriters look to increase shares on top-quality risks often also carrying large premiums.
• The chase for GWP will also benefit Tier 2 and 3 risks, potentially attracting new capacity to programs, driving levels of competition not always associated with more challenging risks.

Uncertainty in the regulatory environment nationally and at the state level in certain regions continues to yield questions from insurers as they seek to understand the economics of these regulatory shifts and potential impact to clients

• While some of the uncertainty around tariffs and their impact on the energy sector specifically has become clearer, unpredictable changes can occur rapidly.
• The passage of the One Big Beautiful Bill could prove to be beneficial to certain sectors of the energy space; it's created uncertainty and new challenges for the renewable energy sector, including renewable fuels.
• Changes to tax credits aiding the profitability of the renewable fuels sector like the 45Z Clean Fuel Production Tax Credit could have an impact on future projects and the economics of those already in operation.
• Regulatory challenges impacting the profitable operations of energy assets in states like California have led to several refiners announcing plans to shut down plants or consider changes to operations to reduce regulatory hurdles.
• Changes in the regulatory environment, which have far reaching impacts on the global oil and gas business, lead to questions and challenges from underwriters as clients adapt business plans to ensure future profitability.
• Regulatory challenges can lead to complications in claims adjustments, potentially extending post-loss outages, increasing Business Interruption claim recoveries.
• The complexity of the business interruption exposures and complications of the regulatory environment in areas where many insureds operate continue to cause insurers concern despite the favorable market environment.

Margins in the downstream space, particularly in refining, remain depressed, impacting premiums and drawing enquiries from insurers on the economics of the sector and exposure reporting methodologies

• An imbalance in the supply and demand curve for refined products highlighted by excess refining capacity and weak demand growth has resulted in tighter margins.
• The announcement of several refinery shutdowns may improve the oversupply issue long term, but isn't expected to make a significant impact in the immediate future.
• While there appear to be some hopeful signs of margin stability or improvement looking ahead to the end of the year, the bull case may only prove to show a moderate margins increase.
• The reduction in reported Business Interruption (BI) values, the higher-rated component in the premium equation, magnifies the premium reduction year-over-year when paired with current market rate decreases.
• Some insurers are now more closely reviewing clients’ BI value calculation methodologies to ensure they properly reflect insurers' real exposures and are in line with policy design and intent.
• BI recovery limitations like the LMA 5515 volatility clause remain standard in downstream, but the soft market provides an opportunity to seek increased cap percentages.

As underwriters look for ways to differentiate themselves beyond just the pricing element of the negotiation, other beneficial improvements to terms may become more available

• To avoid further degradation of premiums, underwriters looking to retain shares without further rate reduction may be willing to offer other improvements to terms and conditions.
• Long Term Agreement (LTA) offerings are now common for Tier 1 risks and clients are taking them up at a higher rate than in the recent past.
• These LTAs represent an opportunity to hedge against market changes in both pricing and terms and can lock up capacity, including finite natural catastrophe capacity, at favorable rates.
• Insureds signing up to LTAs may not capture the full savings available in the soft market cycle, but are in exchange receiving predictability and the potential of avoiding a rapid change in market pricing should significant market events like large losses transpire.
• LTAs can be utilized in combination with annually renewing capacity and/or tranches of LTAs alternating years to create a rolling hedge structure.
• Quote sweeteners like No Claims Bonuses are now more available than in the recent past in the downstream/midstream space in some instances along with other non-rate-focused client benefits.
• The favorable market environment also represents an opportunity to seek coverage improvements paired with non-concurrency reduction or elimination, which should be a key strategy element in addition to aggressive pricing targets.

Auto Liability claims frequency and severity remain a concern across all sectors, continuing to impact Lead Umbrella pricing and limits offered

• Despite nine consecutive years of rate increases for primary Auto Liability losses continue to outpace rate increases each year.
• Challenging jurisdictions in Texas and Louisiana remains problematic as well. Clients with operations in these areas will face increased scrutiny as larger awards and settlements are impacting lead umbrella limits and pricing due to limits vulnerability.
• Excess carriers will continue to focus on Hired Auto Liability exposures and contractual risk mitigation practices and third-party limits sought.

Oilfield Services companies with losses or heavy auto-exposure are experiencing an extremely challenging marketplace in 2025

• The Oilfield Services segment continues to see the largest uptick in General Liability/Excess Liability claims due to an increase in severity in both judgments and settlements for workplace injury lawsuits.
• “Action-Over” lawsuits appear to be increasing from both a frequency standpoint and settlements continue to be paid by Lead Umbrella policies, impacting availability limits from certain carriers.
• Clients with heavy fleets will face increased scrutiny as larger awards and settlements are impacting lead umbrella limits and pricing due to limits vulnerability.
• Lead Umbrella capacity is quickly shrinking and the market is quickly hardening for many companies within this sector, especially those with larger fleets or large losses.

Natural Resources excess liability capacity has remained stable overall in 2025, although capacity availability has shifted from the U.S. to London in certain sectors

• Despite the concerning increase in litigated claims in all sectors, liability capacity remains stable year-over-year, although lead Umbrella limit availability has decreased.
• Excess capacity in certain segments has decreased domestically, while London capacity has increased in the first $100 million of programs.
• It’s critical that clients highlight auto-safety programs/driver hiring criteria, contractor limits sought and direct communication with incumbent liability markets is crucial.
• Excess liability rate increases have tapered off as the 2025 year continues.