Gallagher: What’s happening in the global energy insurance market?

In the upstream energy sector, Gallagher expects clients to see varying rate rises, determined by risk type, with businesses that have large-scale assets and good loss records more likely to see rate reductions. For the midstream energy sector, the report found more opportunities for projects such as carbon capture and storage (CCS). It also saw increased capacity for midstream risks, which means rate rises are relatively low.

The report claimed that downstream risks might be nearing the end of a hard market cycle, although underwriters still focus on natural catastrophe risks.

“High and stable capacity is helping limit rate rises, but we are seeing underwriters tighten terms and conditions for some risks, alongside higher rate rises for others, including natural catastrophe exposures,” it said.

Read more: Gallagher Re bolsters APAC business with senior hires

Gallagher’s Global Energy Insurance Market Update also looked into the North American and global energy casualty risks and found that strong capacity and the impact of new entrants are “making life easier, less costly, and more profitable.” However, the inflation and the potential consequences of litigation related to nuclear verdicts might create problems.

Despite significant cumulative loss activity in the power sector in 2021, Gallagher found a modest rate increase due to broader trends, new capacity, and tighter competition in the market.

“We note the impact of Lloyd’s directive on underwriting new coal business and the approaches being taken by some syndicates prepared to work with coal clients that can demonstrate they are working toward an orderly transition to renewable energy,” the report said.

Meanwhile, Gallagher found that the renewable energy market is now more stable and profitable. However, it identified trends that need to be monitored, including the effect of unpredictable global weather patterns on projects in locations frequently hit by extreme weather events, underwriter uncertainty over some new technologies, and supply chain disruption.

Lastly, and unsurprisingly, the report said ESG continues to influence many energy industry clients due to increased pressure to mitigate negative environmental impacts.