WTW Energy Market Review Update 2024
Meeting growth targets has been challenging across the board for downstream (re)insurance markets, and competitive pressures are starting to take hold.
With the 2023 loss record experiencing some further deterioration, it now hovers on the edge of being unprofitable for downstream insurers. In an ordinary year in the insurance cycle, this should result in insurers holding or even slightly increasing rating levels. However, 2024 was far from an ordinary year.
“Companies that have a better balance between the competitive risks they retain and the challenging risks they transfer, will have more scope for negotiation.”
Andrew Brunero | Global Head of Downstream Energy Broking, WTW
While there were some attritional losses, as would be expected, the absence of major headline losses in 2024 has resulted in it being a historically benign year for loss activity. A total of c.$540 million of losses has been recorded in our database in 2024 so far, and even considering the impact of a recent fire-related loss in Greece at potentially $500-600 million, which does not feature in our database yet, losses are still unlikely to overturn the downward pricing trend.
It’s been a profitable year. After years of hardening market conditions, the loss figures pale against the $4-4.5 billion of premium income. This profitability achieved in 2024 – only the fifth year of profitability since the year 2000[1] – will be a key driver in accelerating the softening market for the year ahead.
Capacity is healthy in the downstream markets. No market players have withdrawn, and we expect insurers to increase their capacity in 2025 buoyed by their recent profits. This expected uptick in working capacity is pushing the needle and supply is beginning to outweigh demand, adding another dimension of pressure to competitive forces driving the softening market.
Challengers are waiting in the wings. In a market that has maintained discipline over the last few years, we now see insurers competing for position and challenge existing lead markets, especially on midstream programs which have performed well historically.
Local markets are stepping up and challenging London capacity on international placements. But the same is true in reverse. While the Middle East and Asia remain competitive enough to apply pressure to London markets, London markets are stepping up and bidding for share.
Downstream energy companies that come to the market with an international placement featuring good local market or captive participation, accurate and evidenced engineering, up-to-date valuations, and a clean loss record, will be best positioned to secure the best possible rate reductions.
“Downstream companies that have a better balance between the competitive risks they retain and the more challenging risks that they transfer to the insurance markets will have more scope for negotiation.” Andrew Brunero, Global Head of Downstream Energy Broking, WTW
While rating levels are coming under pressure from market forces, risk quality will be here to stay, and evidencing superior risk controls will be a determining factor of whether companies get a 5% or 20% reduction.
Heading toward 2025, we are seeing a steady and meaningful softening. But merger and acquisition (M&A) activity could rock the boat. Consolidation could lead to a reduction in the available premium pool as the larger size of consolidated entities will drive risk retention strategies.
Against a backdrop of ambitious growth targets and falling rates, insurance markets will be watching these trends closely over the coming years, but it is unlikely to overturn the softening conditions in the immediate future.
Download the full report to find out how you can make strides in a softening market.
| Title | File Type | File Size |
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| Energy Market Review Update 2024 | 2 MB |
