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Energy Market Review 2021

Did you know that the energy transition is accelerating?

Climate|Medioambiental
Climate Risk and Resilience|COVID 19 Coronavirus|Geopolitical Risk

By Robin Somerville | April 7, 2021

Our Energy Market Review 2021 is produced by our Natural Resources team in London, with contributions from colleagues all over the world.

Conditions are now more promising for those programmes that have already been significantly impacted by the hardening market conditions than for those who have not.

Welcome to this year’s Energy Market Review. There are three main insurance market trends that we highlight in this year’s Review. First, there is the emergence of two tiered markets; conditions are now more promising for those programmes that have already been significantly impacted by the hardening market conditions than for those who have not. Second, the impact of COVID-19; on the Upstream side, the dramatic curtailment of Exploration and Production (E&P) operations and on the Downstream side, reduced Business Interruption (BI) values. Thirdly, the long-running insurer concerns over premium income levels, particularly in the Upstream sector. Clearly this issue is linked to the effects COVID-19, but given the acceleration of the energy transition, overall E&P and refinery activity levels in the energy sector are unlikely to recover to previous levels at any time soon.

In the meantime, the besetting issue confronting the energy industry – that of climate change and the resulting energy transition – has, if anything, accelerated during the past 12 months, and we are putting this issue front and centre of our Review once again. Please read on and I’d be delighted to discuss any of your issues arising out of this publication with you at any time.

Climate change and the resulting energy transition – has, if anything, accelerated during the past 12 months”

Graham Knight
Head of Global Natural Resources
Author

Global Head of Natural Resources Risk & Broking,
Willis Towers Watson

Energy Market Review 2021 - Webinar

This is a recording of the webinar which was held for the launch of this Energy Market Review 2021. Our global Natural Resources team gather with expert panellists to discuss the challenges and risks seen in the energy industry.


Table of Contents


  1. Introduction

    By Graham Knight, Head of Global Natural Resources, Willis Towers Watson | April 2021

    At Willis Towers Watson we continue to support our clients in achieving an orderly energy transition, enabling them to increasingly align their business strategies in response to these stakeholder challenges and pivot towards a net-zero future. We are committed to taking a positive approach to this issue, helping our clients achieve their new objectives as rapidly as possible. We very much hope you enjoy reading the Review and as ever would welcome any comments or feedback that you may have.


01

The accelerating transition


  1. The energy transition: from International Oil Company to Integrated Energy Company

    By Graham Knight, Head of Global Natural Resources, Willis Towers Watson | April 2021

    We are delighted that Dominic Emery, Chief of Staff at bp plc, agreed to be interviewed by us a few weeks ago and an edited transcript of our conversation is the leading article of this year’s Review.


  2. Climate change and oil & gas: a view from an industry expert

    By Ian Phillips, Development Director with Pale Blue Dot Energy Limited | April 2021

    It is a cruel irony that in any other industry the market fundamentals that drive the oil & gas industry would point to a booming future if it wasn’t for climate change. Indeed, investors would be positively queuing up to be involved and customers would be delighted with the service that they would receive.


  3. The energy transition: an undiscovered country

    By Tony Rooke, Director of Climate Transition Risk, Climate and Resilience Hub, Willis Towers Watson and Lucy Stanbrough, Emerging Risks Hub Leader, Willis Research Network | April 2021

    The 2020s promises to be a decade of change like no other for the energy industry. It is truly an “undiscovered country from whose bourn no traveller returns”. Energy is a fundamental bedrock of our economy, alongside food & water, communication and finance.


  4. Supporting the energy industry through the transition: the view from a global insurer

    By Sam Harrison, Group Chief Underwriting Officer, QBE, Peter Burton, Executive Director - International Markets, QBE, and Richard Burge, Head of Upstream Broking and Chief Broking Officer Natural Resources, Willis Towers Watson | April 2021

    In March 2021 Willis Towers Watson’s Chief Broking Officer for Natural Resources, Richard Burge (RB), spoke to both Sam Harrison, Group Chief Underwriting Officer (SH), and Peter Burton, Executive Director, International Markets (PB) from global insurer QBE. They discussed a variety of topics, ranging from the future of the global insurance markets to the impact of climate change and the energy transition.


02

Managing risk through the transition


  1. Key political risks for energy companies in 2021: survey results

    By Sam Wilkin, Director of Political Risk Analytics, Willis Towers Watson | April 2021

    What are the top political risks for energy companies in 2021? To answer this question, perhaps there is no one better to ask than the energy companies’ own in-house analysts.


  2. COVID-19 and civil unrest: the impact on the energy industry

    By Tim Holt, Senior Risk Advisor, Alert:24, Special Contingency Risks | April 2021

    Throughout history, pandemics - such as the plague - have driven economic crises, political upheavals and social unrest. COVID-19 is no exception, and multilateral organisations are sounding the alarm.


  3. Your programme design: is it keeping your company safe?

    By Andy Smyth, Senior Partner in Willis Towers Watson’s Strategic Risk Solutions division | April 2021

    Energy company insurance managers have faced significant challenges in recent months. Not only has the pandemic impacted the demand for energy and company operations, but coming on top of the hardening insurance market, and increased scrutiny of risks by insurers, placing an insurance program within budget constraints has been a real challenge for many firms.


  4. Risk engineering: innovation in communication

    By Alan McShane, Head of Engineering at Willis Towers Watson Natural Resources GB | April 2021

    When the hard insurance market conditions, making renewal negotiations more challenging and time intensive, is combined with the myriad of changes to our professional lives brought about by the global pandemic, there is now a real need for innovation in communicating effectively in today’s risk management environment.


  5. OIL: continuing to deliver long-term, stable benefits to its members

    By George Hutching, SVP & COO of Oil Insurance Limited | April 2021

    Oil Insurance Limited (OIL) continued to deliver the long-term stable benefits the members have grown accustomed to while elements of the commercial market were anything but steady.


03

The Energy insurance markets in 2021


  1. Executive Summary

    A summary on the conditions in almost every arena of the Energy insurance markets as they continue to harden, albeit not quite to the same extent as 12 months ago.


  2. Berkley Offshore’s Mike Hayes: offering better service for longer term Liability clients

    By Mike Hayes, Senior Vice President at Berkley Offshore Underwriting Managers (BOUM) and Mike Newsom-Davis, Head of Liability, Natural Resources, Willis Towers Watson GB | April 2021

    Mike Hayes (MH) is Senior Vice President at Berkley Offshore Underwriting Managers and has over 35 years' experience in the London insurance market. In this interview he talks to Willis Towers Watson’s head of Liability in London, Mike Newsom-Davis (M N-D) about the current conditions in the Energy Liability markets, the current challenges facing insurers and the value of energy companies maintaining long term relationships with insurers.


  3. Upstream: conflicting pressures result in a two-tiered market

    By Paul Braddock, Head of Upstream, Willis Towers Watson London and Richard Burge, Head of Upstream Broking and Chief Broking Officer Natural Resources, Willis Towers Watson London | April 2021

    In overall terms, the Upstream market has had another satisfactory underwriting year. We reported last year that the hardening process in this market was considerably less dramatic than in some of its related classes of business,and that if the recent profitability of the portfolio could be maintained, then perhaps the degree of rating increases would abate as we moved further into 2021.


  4. Downstream: pressures ease for some, as two-tier market emerges

    By Adam Barber-Murray, Head of Downstream Broking, Willis Towers Watson London and Michael Buckle, Head of Downstream, Natural Resources, Willis Towers Watson London | April 2021

    Last year our Review presented a very gloomy picture of a significant hardening of the Downstream market. With 2019 losses continuing to surpass premium income in a similar fashion to both 2018 and 2017, we had very little good news to offer buyers in hope of better market conditions on the horizon.


  5. Liabilities: hardening dynamic continues

    By David Clarke, Executive Vice President for Willis Towers Watson’s Liability and Joanna Newson, Director, Environmental Practice, Willis Towers Watson London | April 2021

    As we suggested in our October 2020 Update, there is still little comfort to be had from a buyer perspective from the International Liability insurance market. While it is true to say that the Property markets are hardening but still not truly hard, the International Liability market is indeed just that.


  6. Energy Construction: a market in transition

    By Michael Venables, Executive Director, Construction, Willis Towers Watson London | April 2021

    Over the last three years, the Energy Construction market has undergone a drastic change, transitioning firmly out of a very soft market. The previous fifteen years of reductions in insurance premiums and broadening coverage has now made way for restricted and regularly challenged policy coverage, together with increased rates and deductibles/excesses, as the markets seek to alleviate their exposures.


  7. Terrorism & Political Violence: smaller, more frequent events lead to larger BI losses

    By Luke Bennett, Executive Director, Financial Solutions Terrorism & Political Violence Practice, Willis Towers Watson | April 2021

    Events in US, Chile and Hong Kong have precipitated significant Strikes, Riots and Civil Commotion losses to the global insurance market, with many losses having been insured in the Property/All Risks market.


  8. International market round-up: outside China, signs of retrenchment continue

    By George Nassaouati, Head of Natural Resources Asia, Willis Towers Watson | April 2021

    A summary on the Upstream and Downstream capacity.


Author

Business Development Director for Willis Towers Watson Natural Resources

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