NU Online News Service, Sept. 2, 11:40 a.m.EDT

Offshore energy business insurance premiums are expected toremain flat for October renewals, depending on location, losshistory and limit sought, according to Chicago-based insurancebroker Aon.

The broker said that this is a very different position from thebeginning of 2009, when rates were expected to rise between 15 and20 percent.

For companies looking to insure large and or complex risks,insurers are still trying to extract rate increases, as they seekto claw back profits from a sector that has been battered bycatastrophic losses such as Hurricanes Katrina and Ike, Aon said.Many insurers, however, are looking to retain market share so thereare still good deals to be made.

Aon pointed out that large rate increases in the energy sectorfor medium-sized risks have failed to materialize so far in 2009because:

o Although there has been a steady string of losses so far thisyear, none have been considered market-changing, so losses have noteroded the returns insurers have been able to make on the risksthey have underwritten.

o Capacity in the insurance market has remained relativelystable despite fears many insurers would withdraw from themarket.

o Confidence in the economy has begun to increase, and thefinancial Armageddon feared in late 2008 and early 2009 did notmaterialize.

o As more energy risks are being underwritten locally,London-based insurers increasingly need to offer competitive ratesto secure new business.

William Lynch, head of Energy, United Kingdom at Aon, said in astatement, "We continue to see strong resistance from buyers toattempts to increase rates in the [U.K.] market, at least formidsize risks."

He said that insurers, however, are under pressure to maintainand increase profitability in this sector, "so whilst capacityremains relatively stable, it is becoming harder to place complexand large risks, particularly if business interruption is a factor.In other words, highly complex or catastrophe-exposed risks arepaying the price for a poor claims history fueled by hurricanelosses."

He added that while insurers will seek rate increases, thoseincreases will not be on the scale predicted earlier, or seen afterHurricanes Katrina and Ike. However, a large storm could changethis dynamic.

"In the meantime, there is definitely an opportunity forbusinesses to secure very competitive rates in Q3 and Q4 so long asthey have strong risk management practices in place," Mr. Lynchadded.