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Survey Report

Insurance Marketplace Realities 2021 – Energy


November 18, 2020

Expect hardening to continue for downstream energy and extreme market hardening for smaller buyers in upstream energy.

Rate predictions

Rate predictions: Energy
  Trend Range
Downstream Increase (Purple triangle pointing up) +30%; higher for loss-impacted programs
Upstream Increase (Purple triangle pointing up) +5%; higher for some loss-impacted and smaller programs

Key takeaway


We expect hardening to continue, though conditions may ease in 2021.


Minimum premium thresholds are now in place for smaller programs — leading to extreme market hardening for smaller buyers.


The impact of the Gulf of Mexico 2020 storm season is likely to be negligible.

  • Most refineries are located to the east of the most-impacted areas.
  • Storm surges have not been as severe as originally expected.
  • Most downstream programs have property damage retentions of $10M+, more for OIL members, thereby reducing the amount of insured loss.

Direct COVID-19 impact is likely to be minimal.

  • COVID-19 only indirectly affects this market — no direct losses are likely to be reported.
  • The only notable effect is to reduce business interruption values and refinery utilization rates, thus reducing the premium pool — despite rating increases.
  • Buyers are growing accustomed to new COVID-19 Exclusion 5393, now almost universally applied.

Buyers question the sustainability of current rate increases.

  • Year-on-year 30%+ rating increases will bring insurance spending under renewed scrutiny from buyer management.
  • Options to increase retentions and/or buy reduced policy limits will become more attractive and feasible.
  • Buyers who had bought down retentions during previous soft markets can be expected to increase retentions now, often through their increasingly robust captives.
  • Reduced demand by buyers may negate recent rate increases and result in diminished rather than increased revenue streams to insurers.
  • Downstream companies are increasingly employing analytical tools to determine optimal retention levels and risk transfer purchasing strategies.

Rate of pricing increases may begin to slow in 2021 as the portfolio returns to profitability.

  • We expect that most downstream insurers will make an overall profit from their downstream portfolio in 2020, given losses reported to date for 2020.
  • Major insurers who had scaled back their lines as the market began to harden may increase written lines on profitable business in 2021, thereby increasing realistic capacity.


The impact of the Gulf of Mexico windstorm season and COVID-19 are likely to be insignificant.

  • Some sub-sea losses may be unreported but, so far, no major losses have been recorded.
  • Most susceptible aging GOM infrastructure was removed following Hurricane Ike (2008).
  • Older units are now often insured for removal of wreck only.
  • GOM wind insurers will try to push further rate rises following Hurricane Laura and other storms, but these insurers are a small group compared to the rest of the upstream markets.
  • Many upstream companies have already elected to self-insure Gulf wind exposures following aggregation of cover post-Hurricane Ike.
  • COVID-19 only indirectly affects this market — no direct losses likely to be reported.

Markets are apprehensive as 1/1 renewal season approaches.

  • The insurance market fears increased reinsurance costs.
  • Upstream markets are likely to pass on reinsurance cost increases to buyers.
  • The upstream offering could become uneconomical if price increases stifle future demand.
  • Upstream companies are increasingly employing analytical tools to determine optimal retention levels and risk transfer purchasing strategies.

Smaller programs are being significantly impacted by new minimum and deposit terms.

  • Underwriters are under no pressure from management to retain small business.
  • Any losses from small programs are likely to be within their reinsurance retentions.
  • Underwriters are now insisting on specific minimum and deposit premiums for smaller business, regardless of previous terms.
  • These developments can result in huge percentage rises (300 – 400%).
  • Some buyers are electing to retain more risk.


Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed subsidiaries of Willis North America Inc., including Willis Towers Watson Northeast Inc. (in the United States) and Willis Canada, Inc.


Business Development Director for Willis Towers Watson Natural Resources

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