
Downstream energy underwriters are looking to bring to a halt a trend of double-digit rate reductions in the wake of a disastrous start to the year for loss activity, sources told Insurance Insider.
The downstream market entered 2025 off the back of a highly profitable underwriting year in 2024, during which time rates had started to soften after a period of substantial hardening.
Softening escalated to double digits in the first few weeks of 2025, but after two major losses struck the market a matter of weeks apart, underwriters are preparing to strengthen their resolve at upcoming renewals.
“I don’t know how anyone could justify giving a rate reduction,” a senior underwriting source said.
The downstream market is heading into a busy period of renewals over the next few months, and underwriters said that while existing quotes would be honoured for 1 March and 1 April renewals, pricing dynamics could then be set to change.
In recent weeks, Insurance Insider has reported on two large claims that struck the downstream market in Germany and California, with combined losses anticipated to comfortably surpass $1bn.
With claims of that scale racked up in the first two months of the year, underwriting sources warned that underwriting profitability for 2025 would already be under pressure, presuming normal loss activity for the remainder of the year.
The claims will begin eroding a global premium pot which broker Alesco pegged at $4.25bn in 2024.
While brokers anticipate pushback from underwriters, some were still optimistic that the amount of available capacity in the market, combined with top-line pressures on open market premium, would continue to tilt dynamics in favour of clients.

Some argued that the current scale of losses was not large enough to be market moving, but that if another major claim emerges this year, it could be enough to shift the balance.
Losses in 2025
Since the start of the year, downstream underwriters have been stung by two major claims.
The first incident occurred in mid-January, when a fire broke out at a Bayernoil refinery in Germany, with total losses expected to surpass EUR600mn ($618mn).
Then at the beginning of February, the Martinez refinery near San Francisco experienced a large fire, which is expected to amount to a substantial claim in the hundreds of millions of dollars.
The ultimate quantum of the two claims remains highly uncertain, given that a large portion of the losses will stem from business interruption coverage, but market practitioners expect the combined loss to comfortably surpass $1bn.
This is a challenging prospect only two months into the year.
“These losses have all occurred at the beginning of 2025, so it does dampen underwriter confidence,” said James Boyle, head of energy at Liberty Specialty Markets.
“Some markets will be reeling a bit from the impact of these significant events in quick succession.”
The resurgence of loss activity comes off the back of a benign year of claims in 2024.
With the exception of a Greek refinery fire at the end of the year, which is expected to cost insurers around $500mn, few major incidents occurred in the downstream space during 2024.
A recent report from Alesco said that the benign claims environment meant that 2024 was “shaping up to be one of the most profitable years in recent memory”.
Rate rises were waning throughout the year, and in the second half pricing started to fall.
Heading into 2025, the softening momentum had picked up.
“I think the market was showing competitive dynamics. The confidence of underwriters was up, and momentum had switched,” Liberty’s Boyle said.
“Brokers could see that there was over subscription on placements, presenting them with an opportunity to reduce prices and show value for their clients.”
Disaster in 2022
Although the downstream market enjoyed a lucrative year in 2024, underwriters are still scarred from the experience of a disastrous underwriting year in 2022.
During that year, a series of huge claims including Freeport, Oneok and PKN struck the market, pushing insurance losses for the year to over $7bn.

In the longer-term, the market as a whole has struggled to turn a profit, with total claims frequently surpassing global premium income this century.
Pricing has improved substantially since 2022, and the market has also moved to impose business interruption volatility clauses, limiting exposure to what has historically been the greatest source of losses.
But underwriters warned that two good years in 2023 and 2024 were not sufficient justification to start giving ground on rate.
Open market challenges
Despite a common consensus in the underwriting community that rate reductions are unsustainable, brokers are still optimistic that they will be able to secure improved terms for their clients.
Capacity in the market remained stable throughout 2024, and Alesco noted that Canopius is looking to increase its capacity in 2025, ramping up competition.
Meanwhile, several factors are contributing to a reduction in open market premium, meaning there is less business for carriers to compete for.
Sources noted that there was an uptick in clients opting to insure within the industry mutual Everen, partly driven by concerns about long-term capacity commitments, given insurer stances to fossil fuels.
The use of captives is also increasingly popular, while M&A activity in the US means that programmes are being bundled together, often resulting in less overall premium.
As a result, insurers with an appetite to grow are competing over a diminishing pool of premium, creating inevitable competitive pressures.
Brokers suggested that while carriers were eager to talk up the market in the wake of the 2025 losses, there would be less willingness to walk away from orders.
Clients are now flying into London for a busy renewal period over coming months.
As negotiations play out, close attention is being paid to whether underwriter rhetoric feeds through into quotes and deals.