A senior figure in the energy space has called for innovative thinking and new ideas, saying it’s the only way to effectively mitigate increasing volatility in the market.
“In this challenging market environment, we have to adjust to the way in which energy industry risks are identified, collated and presented to insurers in an era where ‘big data’ is king,” said George Nassaouati, head of natural resources at Willis Towers Watson
“We have to be relentless in our pursuit of fresh ideas that produce valuable new products and services for the energy industry,” he added.
Nassauati’s comments come after WTW released its 2019 Energy Market Review, which addresses industry issues as well as emerging trends and evolving risk management tactics.
“This year’s Energy Market Review highlights the inherent volatility in our insurance markets, which are now showing increasing signs of hardening,” Nassauati. “We have to adjust to develop revised strategic risk partnerships with key stakeholders so that the volatility inherent in our insurance markets is mitigated,” he added.
Key insurance market findings from the review include:
Market capacity appears to be fluctuating, with a marginal increase in the upstream market (from US$7,751m to US$8,109m) but also the first decrease in the downstream market (from US$6,808m to US$6,248m) since the aftermath of the 9/11 tragedy.
Upstream has had another mild loss year, stifling the hardening dynamic in this market. However, land rig and other onshore losses are currently causing insurer concern.
By contrast, the downstream market has had another gruelling loss year, while the recent twin losses emanating from Darwin are causing serious concern in an already reeling construction market.
Except where sought-after programs have been extensively re-modelled, or where risk profiles have significantly changed, almost every program will now be subject to some form of rating increase (with the one exception of the growing energy insurance market in China).
In the upstream and liability markets, these are generally relatively mild; not so in downstream and construction, where the fight to survive for some insurers is now entering a decisive phase.
On balance, the upstream market has continued to generate underwriting profits, although the report suggests it would not take much to change this should the current mild loss record deteriorate. For downstream however, the prospects for this portfolio look bleak unless there is some improvement in what has been a disastrous couple of years for these insurers.