Energy market uncertainty set to continue, but insurance price pressures may ease
WTW's Spring 2023 Energy Market Review highlights ongoing challenges in the global energy sector, including the transition to net zero, price volatility, and regulatory uncertainties. The report underscores rising insurance costs due to these disruptions. It emphasizes the need for governments to prioritize energy security, especially in light of the Ukraine conflict. Insights from WTW experts advocate for risk optimization and reassessment of insured values amidst inflation. The report anticipates a potential softening of insurance market pressures this year, provided there are no major losses. Key findings cover sub-classes in energy insurance and geographical market intelligence.
- Increased focus on energy security may lead to growth opportunities for operators and contractors.
- Predicted easing of insurance market pressures in 2023, benefiting overall sector stability.
- Continued uncertainty in the energy sector may drive insurance costs higher.
- Regulatory volatility and immature alternative energy strategies could hinder market progress.
LONDON, April 04, 2023 (GLOBE NEWSWIRE) -- Market volatility is very likely to continue for the global energy sector, which remains beset by challenges including:
- the necessity of net zero transition,
- dramatic price fluctuations,
- immature alternative development and adoption strategies, and
- a fluctuating regulatory backdrop.
The uncertainty resulting from these market disruptions is one factor fuelling continued insurance price increases across the sector, according to the Spring, 2023 WTW Energy Market Review published today by WTW (NASDAQ: WTW), a leading global advisory, broking, and solutions company.
In 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.”
Contributions to the Review come from a range of WTW experts and cover subjects including:
- risk optimization strategies for a potential recession,
- maximizing Return on Capital through an assessment of insured values,
- understanding supply chain risk, and
- tackling the “competence barrier.”
In Optimising risk: Strategies for a looming recession, Andy Smyth, who leads the WTW Risk & Analytics team in London, says insurance managers need to understand fully their key risk drivers, how they may be mitigated, and how different strategies balance cost and the need for protection.
Justin Paglio, Senior Director for Risk, Forensic Accounting, and Complex Claims at WTW, says in Reviewing insured values: How to maximize return on capital, that the new inflationary environment has altered the value of assets. Risk managers should reevaluate them to optimize risk transfer and support a broader exploration of vulnerabilities and resource deployment.
Jim Walker, a Risk Control Engineer in WTW’s Natural Resources business, shows how a lack of competence contributed to many high-profile, historical offshore losses. He explains how a Competence Management and Assurance Scheme can reduce risk.
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, and WTW’s Richard Burge and Adam Barber-Murray.
Asked to comment on the impact of the war in Ukraine, Sankey cited 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.”
The balance of the Review includes sub-class analyses covering:
|
|
|
|
|
|
|
Also included is 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,” Knight continued, “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.”
Download the complete report here.
About WTW
At WTW (NASDAQ: WTW), we provide data-driven, insight-led solutions in the areas of people, risk and capital. Leveraging the global view and local expertise of our colleagues serving 140 countries and markets, we help organizations sharpen their strategy, enhance organizational resilience, motivate their workforce and maximize performance.
Working shoulder to shoulder with our clients, we uncover opportunities for sustainable success—and provide perspective that moves you.
Learn more at wtwco.com.
Media contact
Sarah Booker: +44 7917 722040
Sarah.Booker@wtwco.com
FAQ
What are the main challenges facing the global energy sector according to WTW's 2023 report?
How might the Ukraine war affect the energy industry as noted in WTW's report?
What does WTW predict for the insurance market in 2023?
What strategies are suggested for risk management in the energy sector?
What geographical markets does the WTW Energy Market Review cover?
