Crude realities: The bottom of the soft market could be approaching for upstream energy in 2026

While loss activity, capital reallocation, or macroeconomic volatility have the potential to finally stem the softening cycle, for the immediate term, the reality is clear: there is no single structural catalyst in sight to drive a meaningful turn in pricing. Instead, abundant capacity, shifting leadership dynamics, and increasingly aggressive underwriting behavior continue to drive the soft market.

Loss activity: Attritional, manageable, and insufficient to stem the softening tide

Last year delivered better‑than‑expected results across upstream portfolios, with improved loss ratios and no major headline events. Back‑year deterioration has been largely attritional.

Willis’ Energy Loss Database has recorded $819 million in losses across 55 events, with the largest at just $130 million — a quantum far too small to shock the market.

Loss frequency exists, with long-tail construction and deepwater operators extra expenses OEE remaining loss-active, but severity does not. The overall impact of these losses has been modest and the upstream energy insurance market is largely unshaken, sustaining the soft market rather than pressuring a correction.

Capacity is at an all-time high, driving competition among underwriters

Capacity growth remains the defining force preventing market hardening. Insurers are expected to add $200–250 million in additional upstream energy capacity through a mix of expansions and new entrants.

Theoretical capacity is hitting $11.5 billion, representing the highest level ever recorded.

Unless there is a dramatic, unexpected capacity withdrawal, supply will continue to outstrip demand, reinforcing softer pricing.

Market behavior: Discipline in turmoil

Market premium is down to $1.5-1.8 billion, but due to a large volume of construction projects last year, only $900 million- $1.2 billion of this is renewing premium.

Key trends shaping underwriting behavior in 2026:

• Underwriters are focusing on securing core clients with large premiums that will be lucrative when the market hardens
• New business is treated as good business at any price to build underwriters’ books in preparation for a hardening market cycle
• Many underwriters are aggressively quoting to assert leadership and relevance and protect their signings in response to the increasing uptake of broker facilities and covers
• There’s declining appetite for subclasses such as deepwater control of well (CoW) and subsea construction with only a few markets willing to quote, typically for small lines, high retentions, and known contractors —  a trend which is showing no sign of changing in the short term

Early signs indicate the end of the softening market is approaching, as some underwriters are beginning to step away from business where rate reductions have become unsustainable to profitability. For now, however, these remain only hints. The overriding sentiment remains that the sooner the market is chased to the bottom, the sooner the hardening cycle can begin.

Ratings are ‘through the floor’

In 2026, 15–20% reductions are available for core upstream risks with clean loss histories and substantial premium on the slip, with 40%+ reductions still observed in exceptional cases.

Around 15% reductions are typical in renewals with incumbent leads but higher numbers are being seen when leaders are tendered. Meanwhile, low double-digit reductions are available for more challenged businesses with loss histories depending on loss quantum.

The overarching pricing trend is unmistakable: even after a decade of softening, the market is still finding new downward territory.

Looking ahead

The upstream energy insurance market in 2026 remains defined by abundance: abundant capacity, abundant competition, and abundant willingness among underwriters to chase premium. But cracks are beginning to show: long-term agreements, isolated discipline, and selective appetite changes hint that the bottom may finally be in sight.

For now, underwriters and upstream energy companies are making strategic decisions to build resilience when the market eventually turns.

Download the full article to find out how upstream energy companies can make strategic decisions in a soft market.