Downstream insurance capacity to rise further in 2018
The downstream insurance capacity is set to rise further in 2018 despite record losses in 2017 while rates remain subdued, according to a Willis Towers Watson report.
Estimates for 2018 show a rise in overall capacity levels to nearly $7 billion for international markets and a very slight reduction to $4.1 billion for North American markets, according to the broker’s Energy Market Review 2018.
With rating levels consistently at the bottom of the spectrum for several years, the situation for downstream insurers has been exacerbated in 2017 by one of the worst loss years in recent times, the report says.
In 2017, 13 losses in excess of $100 million were recorded, more than in 2016 and considerably more than in 2015. Four of the claims events were Gulf of Mexico windstorm losses, although hurricanes Harvey, Irma and Maria (HIM) caused much less damage to the downstream portfolio than hurricane Ike in 2008 or Hurricane Katrina in 2005.
Of far greater significance to the downstream market has been the degree of non-natural catastrophe claims made against the market, and losses may grow further, worsening the performance of the downstream market.
On a positive note, the market softening of the last four years appears to have bottomed at the January 1 renewals following the 2017 losses, according to Willis Towers Watson.
Modest rate increases were the norm, as well as some limitations on the amount of sub-limited cover available for coverages such as contingent business interruption. This has, however, generally been a disappointment to most downstream insurers, as during the last quarter of 2017 several were suggesting that the market turn in 2018 would be more pronounced, the report said.
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