NU Online News Service, Feb. 25, 9:23 a.m.EST

Risk managers in the energy sector rate commodity pricefluctuations as the top peril their industry faces, according to apoll released by insurance broker Aon.

Its findings were contained in a report titled "2010 U.S.Industry Report: Energy," which noted that "commodity markets haveseen dramatic volatility; price volatility is a tremendous concernand a sizable risk for both sellers and buyers."

"When prices cannot be stabilized, cost structure, budget,inventory and production can all be affected," Aon noted.

For all industries, commodity price risk came in fifth.

Failure to attract or retain top talent andregulatory-legislative changes rounded out the top three as equalconcerns for risk managers, while business interruption rankedfourth and political risk-uncertainties and climate change roundedout the top five.

When it comes to readiness to handle these issues, only businessinterruption received 100 percent score.

Natural resource scarcity, which ranked seventh along withenvironmental risk, was the closest to being at a full readinesslevel with a score of 90 percent.

Commodity price risk received a readiness score of 88 percentamong risk managers.

Concerning their choice of insurance carrier, risk managersranked financial stability as the most important concern inselecting an insurer in both the energy sector and allindustries.

Additional capacity is ranked as the second highest priority inchoice of carrier. The report noted that several Aon clientspurchased higher casualty limits because of additional marketcapacity.

Aon said companies are seeking more flexibility from carriersand want these companies to "recognize and reward internal riskmanagement through lower premiums."

The majority of Aon's energy clients maintained theirdeductibles and retentions for property, casualty, and directorsand officers liability. The exception was natural catastropheexposed accounts, which took larger deductibles.

Clients have also taken advantage of the competition in theinsurance marketplace for directors and officers liability coverageby re-evaluating their coverage and purchasing higher limits andadding or increasing broad form A-side limits that apply where thecorporation does not indemnify directors and officers.

Property insurance, for non-catastrophe exposed risks, isexpected to continue its soft trend on rates, Aon said, andcompanies with offshore exposures "will seek significant relieffrom the terms and conditions" of last year's policies in the wakeof the quiet hurricane season.

The report is online at www.aon.com.