Insurance Marketplace Realities 2025 – Energy

Rate predictions: Energy

	Trend	Range
Property
Tier 1*		-5% to -10%
Tier 2**		Flat to -5%
Tier 3***		Flat to +5%, loss history dependent
Liability****
General liability		Flat to +5%
Auto		+8% to +15%
Workers compensation		Flat to +2%
Lead umbrella		+5% to +10%
Excess liability		+2.5% to 10%

*Tier 1: Well-engineered and operated risks with clean loss history
**Tier 2: Risks with clean loss history, but lower premium income/smaller insurer panels
***Tier 3: Loss-affected programs and/or challenging risks with significant natural catastrophe exposure
**** Pertains to upstream/midstream/downstream/chemicals/mining; does not include oilfield services

Property

Despite the lack of significant new capacity introduction in 2024, many insurers are looking to expand participation on high quality risks.

• The profitability of the sector in 2023 and increased pricing and retention levels following a lengthy hard market cycle is attracting interest from management.
• Budgets set in 2023 for the 2024 calendar year, based on modest growth goals and expectations of stable market conditions, are now being challenged.
• As rates decline and competition increases for participation on programs, GWP goals must be met with new business premium or increased shares in incumbent business.
• 2022 and 2023 saw several insurers reducing line sizes in hopes of stabilizing portfolio performance. But current market conditions and GWP goals are now reversing that trend for some insurers.
• Over the last six months, robust marketing efforts have often yielded levels of oversubscription of programs not seen in several years.
• Previously challenged placements are now seeing increased interest as insurers look to replace premium as a result of lost business or premium decline due to rate reductions.

The predictions of a high-activity 2024 Atlantic hurricane season have not yet materialized.

• Hurricane season predictions for 2024 described a high-activity season because of a number of factors, including higher than normal water temperatures and a transition to La Niña conditions.
• The season did begin with some notable events, including hurricane Beryl, the earliest Category 5 hurricane on record, appearing to validate season predictions.
• The month of August brought lower than typical activity, casting doubt on early season projections.
• September brought more activity to the Gulf Coast including hurricanes Francine and Helene, impacting Louisiana, the Florida panhandle, Georgia and the Carolinas. Market impacts from these storms are still being quantified, but initial estimates of insured losses do not appear to be severe enough to impact the prevailing market trend for energy risks.
• The balance of the 2024 wind season could have significant impacts on a market in the steady process of softening; a destructive back half of the season could turn the market again, but a quiet season closing in November could expedite the softening process.

While valuation accuracy remains a market topic, the pressure for significant change has subsided.

• Market-trusted indices for property damage values are no longer recommending a significant increase, with some showing flat or even small reductions in recommended inflation rates.
• With competition heating up and rates improving in favor of buyers, insurers are diverting their attention away from value adequacy.
• Despite the relief of severe pressure on value adequacy, the topic has not been eliminated from market conversations. Many insureds worked diligently to make adequate value adjustments over the past several years, making the discussion with insurers less challenging than in previous years.
• Insureds who responded to calls in the market for improvements in value reporting are being rewarded for their efforts, while those who elected to resist change continue to experience pressure.
• Coverage restrictions, such as average clauses and occurrence limit of liability clauses with recovery restrictions based on reported values, remain for those who have not made adequate changes to value reporting methodologies.

As the market softens, improvements and expansions in coverage are becoming increasingly achievable along with favorable ratings.

• During the hard market cycle, increases in coverage restrictions and tightening of coverage terms were common.
• As the market transitions back into a softening cycle, brokers are working to regain lost ground in program terms and conditions.
• Pricing improvements are more achievable in this period of market softening, but renewal outcomes can be enhanced by seeking coverage expansions which may have been unachievable in recent years due to market conditions.
• In some instances, restructuring program layering can yield expansions of limits and increased competition, improving both pricing and coverage outcomes.

Environmental, social and governance (ESG) is no longer a critical topic for most but remains a focus for some key European insurers.

• Pressure for natural resources clients to implement and execute detailed ESG plans reached a fever pitch during the height of the hard market.
• As market trends improved and politicization of the ESG terminology garnered criticism, pressure on clients to continue ESG messaging has slowed.
• Despite the reduction in pressure, ESG remains a baseline metric for many insurers in assessing partnerships with insureds.
• ESG continues to be an important factor in the decision-making process of several large Continental European insurers but remains focused primarily on upstream exploration and production (including oil sands and arctic exposures) and coal.

Liability

Auto liability claims remain a concern across all sectors, impacting lead umbrella pricing and capacity again in 2025.

• Despite nine consecutive years of rate increases for primary auto liability, losses continue to outpace rate increases each year.
• Jurisdictions that used to be considered neutral are now becoming plaintiff-friendly venues as well in places like the Permian Basin where activity is concentrated, and frequency of losses is high; areas such as Louisiana and South Texas continue to be challenging.
• Clients with heavy fleets will face increased scrutiny as larger awards and settlements are impacting lead umbrella limits and pricing due to limits vulnerability.
• Excess carriers will continue to focus on hired auto liability exposures, contractual risk mitigation practices and third-party limits sought.

Oilfield services companies are experiencing an extremely challenging marketplace in 2024, and the horizon looks concerning.

• The oilfield services segment continues to see the largest uptick in general liability/excess liability claims due to an increase in severity in both judgements and settlements for workplace injury lawsuits.
• Action-over” lawsuits appear to be increasing from both a frequency standpoint and settlements, which continue to be paid by lead umbrella policies, impacting limits availability from certain carriers.
• Clients with heavy fleets will face increased scrutiny as larger awards and settlements are impacting lead umbrella limits and pricing due to limits vulnerability.
• Lead umbrella capacity is quickly shrinking, and the market is quickly hardening for many companies in this sector, especially those with larger fleets or large losses.
• We predict this will become more of an issue as 2025 develops.

Overall capacity should remain stable in 2025 for most sectors.

• Despite the concerning increase in litigated claims in all sectors, liability capacity remains stable year over year.
• This should mitigate any concerning rate increases for clients with profitable loss histories in all other (non-OFS) segments.
• Capacity remains steady in the U.S., London and Bermudian marketplaces.
• It is important that clients highlight auto safety programs/driver hiring criteria and contractor limits sought; direct communication with incumbent liability markets is crucial.
• We suspect that modest excess liability rate increases will lessen as the year continues.

Disclaimer

Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).