9 April 2014 Insurance

Energy sector to boom at mid-year renewals

Energy insurance buyers will benefit from renewed competition and a softening of energy insurance at their mid-year policy renewals.

According to Marsh’s latest Energy Market Monitor, the energy sector will benefit from an influx of capacity from new capital providers alongside reduced reinsurance cost and minimal losses.

Marsh said that many insurers are displaying an increasingly strong risk appetite for energy risks and have released additional capacity in the first quarter of 2014.

Andrew George, chairman of Marsh’s Global Energy Practice, said: “After three years of overall stability in the energy insurance marketplace, new capital streams are changing its dynamics, making it the most volatile it has been for a generation.

“The additional capacity created by an influx of capital from private equity and hedge funds could be potentially short-lived, if expected returns on investment fail to materialise. Meanwhile, longer-term investments from pension funds could provide greater stability, although this type of capacity is only just starting to have an impact.

“Reduced reinsurance costs, good loss ratios particularly in the upstream business, and an intensified focus on growth by key insurers all indicate a downward pricing trend across key energy risks. This downward pressure on rates is likely to accelerate leading up to mid-year renewal dates, which is good news for energy insurance buyers with robust risk portfolios and good claims histories.”

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