Downstream energy insurance losses in 2025 may have exceeded the sector’s entire global premium pool, even as rates continued to fall, according to a new report by Gallagher Specialty.
Total loss reserves in the downstream segment surpassed US$4 billion last year - with some estimates placing the final figure as high as US$5 billion - against an estimated global premium pool of US$3.5 billion to US$3.75 billion.
The PBF Martinez incident was the most significant single event, compounded by the Bayernoil Refinery fire in Germany (US$757 million) and the MOL Group Refinery incident in Hungary (US$450 million). Despite those losses, rate softening reached up to 20% for well-engineered, loss-free risks through 2025, leaving the downstream market delicately positioned at the start of 2026.
The broker’s first-half 2026 Energy, Power & Renewables Insurance Market Update found that overcapacity is the defining theme across upstream, midstream, downstream and casualty segments, putting pressure on underwriters to meet business plan targets while creating conditions broadly favourable to buyers.
In the upstream sector, blended rate reductions across portfolios averaged 11% in 2025, a year described as relatively benign in terms of losses. The report warned that upstream rate reductions in 2026 are “almost certain to be in the double digits”, with the pace of reductions expected to accelerate as the year unfolds. Gallagher Specialty cautioned that only a series of major insured losses or a significant withdrawal of capacity could halt what it described as an “inevitable snowball effect” in the rating cycle.
The midstream segment is expected to see increased available capacity in 2026, with high-quality buyers likely to benefit from low double-digit premium reductions. Total midstream market capacity remains approximately one-fifth of the upstream market, a disparity the report said should contribute to greater pricing stability relative to upstream.
In the power sector, new entrants, including The Hartford, Volt and Joule (Ascot), have joined incumbent insurers, intensifying competition and contributing to sustained rate suppression. Lloyd’s decision in September 2025 to cease discouraging insurers from underwriting coal and other fossil fuel projects prompted several syndicates to re-enter the coal market, marking the first significant capacity expansion in that segment in more than five years. The boom in artificial intelligence was also identified as a source of new opportunity, with data centre construction and operational projects presenting substantial prospects for the power and renewables markets.
In the renewables segment, Battery Energy Storage Systems (BESS) recorded the most significant rate reductions of any sub-sector in 2025, with market corrections of 20% to 40%, driven by improved technology performance and reduced fire risk. Future reductions are expected to stabilise in line with wind and solar, typically ranging from 5% to 25%. China’s manufacturing dominance was also noted, with the country producing 92% of global solar modules and 82% of wind turbines.
On the casualty side, the London market continued to attract US energy liability placements, with the most significant growth occurring in the first US$25 million of coverage towers. Upstream-focused underwriters reported modest rate increases of around 2% in the second half of 2025, while downstream and midstream risks placed in London experienced single-digit increases of 6% to 7%.
