The changing risk profile of energy risks should be driving rateincreases, but high capacity in the marketplace and surprisinglyfew losses are keeping prices down, says a report from insurancebroker Marsh.

“Are we at the critical point of inflection for the markets?There seems a compelling case for it,” says the report. “Certainlymany underwriters hope so; some believe it.”

However, the broker's analysis of the energy-industry sectors“points to business as usual,” which is a disappointment tocommercial carriers and “good news for energy-insurance buyerslooking for a more stable environment.”

The report, titled, “Marsh Insights: Energy Market Monitor—Pointof Inflection?” says the upstream energy business, involvingexploration and production, should be experiencing upward ratepressure from the reinsurance side due to disciplined underwritingand losses outside of the energy market—such as Superstorm Sandyand the Costa Concordia—where underwriters purchased whole accountprotections covering marine and energy risks.

However, competition from markets in Dubai, Singapore andHouston and additional capacity from reinsurance syndicates areholding rates down, the report says.

The sector also experienced an “unprecedented” low number oflosses in 2012, adding more downward pressure on rates.

“It is inconceivable that the market will not be givingwholesale reductions by May or perhaps even earlier if thefrequency of losses remains at these unprecedentedly low levels,”says the report.

Capacity is also having a stabilizing effect on the downstreamenergy-property industry, which involves refining, selling anddistribution.

While operational losses in 2012 totaled between $2billion and $2.5 billion for the sector, which “had previously beenfree [of claims] and seen as 'best in class,'”the losses have notbeen across the broad market, and attempts to talk up rateincreases in early 2013 were not fruitful, says the report.

In light of the Japanese Tsunami and floods in Thailand in 2011,one downstream area getting increased attention from underwritersis contingent business interruption. High limits are available “ifneeded (for a price), but underwriters are trying to reduce to aminimum the limits for 'unnamed' exposures.”

Overall, for the downstream energy market, Marsh says, “in theabsence of a market-changing event we foresee the status quocontinuing for the downstream energy-property market in2013.”