Whilst volatility and uncertainty in the global energy sector is likely to continue, the market could see a possible easing of these hardening pressures on insurance, in the absence of major catastrophic losses or other force majeure events.

So says WTW in its latest Energy Market Review, published today. Part One the review considers the future beyond peak oil. Its sweeping survey of the energy industry highlights the challenges it faces, but also illuminates opportunities.

“Security of supply will remain a top priority for governments,” the review states. “The US is responding to higher prices by striding ahead in all areas of energy production. If international governments follow suit, then operators and contractors are set to benefit.”

Justin Paglio, senior director for risk, forensic accounting and complex claims at WTW, says that the new inflationary environment has altered the value of assets. Risk managers are advised to reevaluate them to optimise risk transfer and support a broader exploration of vulnerabilities and resource deployment.

Jim Walker, a risk control engineer in WTW’s natural resources business, points out meanwhlie how a lack of competence has contributed to many high-profile, historical offshore losses.

Part Two of the review discusses the current state of energy insurance markets. It begins with a Q&A between Tom Houston, head of upstream at Convex Insurance, Paul Sankey, the carrier’s head of downstream.

Asked to comment on the impact of the war in Ukraine, Sankey cites the way it has revealed the energy industry’s integration with the global economy, as highlighted by Europe’s turn from Russian oil towards imported LNG.

“In the short term the world is focusing on energy security and that shift alone makes the energy industry different, while other factors such as energy sustainability and energy affordability are also going to change it in the long term,” Sankey said. “As economies move away from their dependence on Russian natural resources, I think these changes are inevitable.”

WTW's review also includes a geographical round-up with market intel from China, Dubai, Latin America and the Nordics.

Graham Knight, global head of natural resources, WTW, says: “With capacity levels at least matching those of 2022, it seems clear that overall supply remains plentiful. But with more sophisticated risk-management options open to major buyers, the market has to consider the possibility that some of the most sought-after business may be withdrawn in favour of increased captive participations – or even a parametric risk transfer solution – perhaps on a permanent basis.

“In very general terms we therefore anticipate a possible easing of these hardening pressures as the year continues, in the absence of major catastrophic losses or other force majeure events.”

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