The energy insurance market is “buzzing with talk of softening”, a new report by Marsh has found, with overcapacity and a lack of major losses creating a volatile and competitive marketplace.
In its latest Energy Market Monitor, Marsh found that reduced reinsurance cost, positive results in 2013 and management’s focus on growth were all part of a downward trend in pricing.
For upstream risks, underwriters have faced “alarming” double digit rate reductions, while overcapacity has led to a decreased percentage share on risks, the report found.
For downstream underwriters matters were also tough, with losses from 2013 of between $2.5 and $3 billion exceeding global premium for the year, which is estimated at around $2 to $2.25 billion.
The downstream market is similarly affected by overcapacity, strong industry results in 2013, management mandates to grow the energy book and a “bullish mood”, which is encouraging markets to deploy more capacity in an already saturated market.
All of this has helped to push downstream rate declines in the 5-10 percent range, with the softening market accelerating in 2014.
Marsh said that without a major loss conditions were likely to persist, although greater regulation and improving safety standards are likely to make such an occurrence less likely.
Marsh, energy, insurance