All material subject to strictly enforced copyright laws. © 2021 Insurance Insider is part of Euromoney Institutional Investor PLC.
Accessibility | Terms & Conditions | Privacy Policy | Modern Slavery Act | Cookies | Subscription Terms & Conditions

North Sea exploration bolsters upstream energy premiums: JLT

A renaissance in North Sea oil and gas exploration helped sustain premium levels in the upstream energy market over 2018, according to JLT.

In the January edition of its quarterly energy newsletter, the broker said an uptick in regional sea drilling had brought new insureds to the market.

Oil and gas production firms without existing captives had come to the market looking to buy upstream insurance, including more business interruption cover, JLT said.

Oil majors and drilling companies have traditionally bought little insurance, instead choosing to cede the majority of risks associated with production to captives.

However, the broker added that heightened regional demand for insurance would only just offset declining global premiums as depressed oil prices constrain demand for cover.

JLT said it expected rate rises of 5 percent or more at first quarter upstream energy renewals and that clients seeking a like-for-like reduction were less likely to succeed than in the same period last year.

“Insurers are also sullenly acknowledging their desired 5 percent rise is probably going to be a best case outcome on most of the desirable business,” it added.

Meanwhile, in the downstream market, a loss-heavy year in 2018 has left underwriters looking to achieve rate rises of between 10 percent and 20 percent across their books, JLT said.

In the fourth quarter of the year carriers showed an increased willingness to walk away from risks after the market absorbed about $3.75bn in losses in the calendar year.

Claims for the year have outstripped the sector’s annual premium pool, which amounts to about $1.75bn. 

“In the fourth quarter a line in the sand seems to have been drawn by insurers in terms of not accepting business, which short of material reason, shows anything less than a nominal rate lift,” the broker said. 

Major losses last year included fires at a Bayernoil-operated refinery in Germany in September and at a petrochemical plant owned by the Saudi National Petrochemical Industrial Company. 

The downstream market is also set to pay out as much as $400mn following an explosion at a Canadian refinery belonging to Irving Oil.

Commenting on renewals across the wider marine market, JLT said the hardening market had led to inconsistent behaviour and that some younger underwriters at times seemed to be “[frozen] like rabbits in a car’s headlights”.

The broker said that despite a number of withdrawals across hull and other marine classes, capacity remained relatively unaffected as the markets pulling back had generally been carriers with smaller books of business.

“We end the year with an extremely confused market and we do not think that the position will calm down any time soon,” JLT said.

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree