The energy market is difficult to read, says a new report by Marsh—so much so that one official classified current conditions as a "harft" market.
Of course, the makeshift word implies the energy-insurance sector is neither definitely soft nor hard.
"The fundamentals still point to a soft environment, but the reality of the marketplace is much more complex," says Jim Pierce, global chairman of Marsh's energy practice. "Capacity is in a state of flux."
Reinsurers have taken a harder approach after losses from natural catastrophes, which have pushed some market share to specialty-energy insurers.
The U.S. liability sector is seeing a clear change in the market for excess capacity, the Marsh report says.
As natural catastrophes impact insurers' bottom lines, excess-liability underwriters are "seeing management pressure to follow corporate need to increase rates and premiums, even if the liability experience is not impacted by losses," the report says. Additionally, some large energy-liability losses are spurring re-examination of price.
Contraction in excess energy liability for U.S. risk is affecting placements in excess of $200 million.
Premiums are up 8 to 12 percent for lead umbrella policies and the U.S. domestic market can still provide follow-form, occurrence-based excess liability limits up to $150 million. But "the low-to-middle part of excess towers has become exceedingly harder to place," Marsh says.
Bermuda markets want higher attachment points and pricing increases of up to 100 percent from 2010.
The primary U.S. liabilities market remains competitive, with exposures on the rise as energy companies grow, Marsh says. Claims from Macondo (Deepwater Horizon) and other pollution events are starting to hit lead markets, the broker adds.
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