An "Atmosphere of pessimism" has taken hold of the "downstream" energy-insurance market after two poor underwriting years, and while capacity has not been impacted yet, one or two exits by leading insurers could trigger a wider withdrawal, a new report says.
In its recent "Energy Market Review," Willis says the downstream energy market, which involves refining, selling and distribution, endured losses from Superstorm Sandy in 2012 after a loss-filled 2011 that included 10 major losses over $100 million.
Some insurers may now be on the cusp of withdrawing from the market, after Superstorm Sandy, in conjunction with historically low rating levels, led to mild hardening of the market. "An atmosphere of pessimism seems to now hold sway following two poor underwriting years in succession," Willis says.
Insurers' fortunes have been better in the upstream energy-insurance market, which involves exploration and production. Willis maintains a "very positive" outlook for this segment, stating that the market "has proved to be consistently profitable in recent years."
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