Downstream energy is an insurance market defying gravity

For insurance buyers, conditions remain favorable. For insurers, it is a year marked by heightened competition, ambitious growth targets and tight profitability margins.

Market losses vs. market pricing: A growing disconnect

2025 was a bruising year for downstream losses, with gross losses of $6.8 billion and net losses of $4–4.5 billion recorded in our Willis Energy Loss Database (WELD). The refining segment was hit the hardest, with the three largest losses all occurring in refineries, in a segment generating only $2–2.5 billion in premium annually.

Further deterioration from losses toward the end of 2025 is compounded by a sizeable early 2026 loss in the $250–400+ million range, posing the question: when will the soft market cycle turn?

Logically, this level of attrition would trigger rate hardening. Instead, downstream rates continue to decline, leading many market participants to question what it will take to trigger market hardening. With $3–3.5 billion in global downstream premium vs. losses of nearly double this figure, underwriting profitability is under real pressure. But competitive dynamics are overwhelming actuarial logic.

Capacity is abundant and growing

Despite the loss-heavy backdrop, capacity is expanding due to:

• New entrants joining the class
• No retrenchment
• Broker facilities playing a growing role
• Significant property market spillover

The bottom line: capacity is no constraint—and this is prolonging the soft market.

Competition is intensifying amid limited new risks

While liquified natural gas (LNG) remains a hive of activity with strong construction pipelines, few new refineries are being built globally. With fresh risk not entering the system, underwriters continue to compete fiercely for existing business to meet ambitious growth targets.

Competitive pressures are driving underwriters to quote aggressively to protect incumbent shares, leverage construction-market relationships to win new downstream operational phases and step forward as leaders more frequently to secure their position on slips. With no major changes to terms and conditions or deductibles, underwriters still feel able to give further rate reductions to protect their signings.

“Profitability targets remain aggressive, despite soft market conditions and an unprofitable year in 2025”, Michael Buckle, Head of Natural Resources GB, Willis Natural Resources.

Rate reductions remain available in early 2026

According to downstream energy brokers, the market has been going one way, and that’s down. “But in 2026, these pressures could be tempered as we move through the year”, Kieran McVeigh, Head of Downstream Energy Broking GB, Willis Natural Resources. Standard reductions are available at ~10%, with 15% reductions commonplace for well-performing accounts.

Downstream business with substantial premium on the slip and well-engineered risks can achieve 25% reduction, but a cat-exposed risk or risks with loss histories can expect more measured reductions.

Looking ahead: A soft market with a hard edge in waiting

Today’s soft market is built on fragile foundations:

• Rising loss severity
• Ambitious insurer growth pressure
• The influx of new capacity
• A construction-light environment for new refinery risk

But any material change — capacity pullback, a sequence of large losses, or a shift in reinsurance appetite — could trigger a fast, corrective hardening.

The soft cycle will end and when it does, price corrections are likely to be sharp and swift. Preparedness is key.

Download the full article to find out how to build stable foundations in a soft market.