SINGAPORE, October 8, 2024 — After enduring a prolonged of hard-market conditions, the (re)insurance property and business interruption market cycles are starting to turn according to the Power Market Review published today by WTW (NASDAQ: WTW), a leading global advisory, broking, and solutions company.
While lower-level attritional losses remain a constant in the power sector, the absence of larger losses in 2023 and 2024 is expected to lead to more competitive pricing in property and business interruption covers. The international liability market has also stabilised with a small uptick in capacity and softer market conditions, leading to greater competition and downward pressure on rates.
Key takeaways from the Review include:
Lyo Foo, Head of Power, Asia, at WTW, said: “In Asia, the power market has been through a phase of correction and hardening. However, at the start of this year, we have seen a notable change in market conditions and readily available capacity has resulted in a return to a buyers’ market. A shift in appetite from coal to non-coal power and the phasing out of underwriting existing coal risks have combined to encourage insurers to seek new opportunities in deploying their capital. We are seeing an increasing number of insurers seeking to offer long-term agreements and rates are expected to further soften over the next 12 months.
“Supply chains are also becoming a top concern, and the business interruption (BI) component of the insurance cover, alongside the potential for rapid escalation of loss quantum, are clear areas of focus. Amid unrest and geopolitical issues, the movement and transportation of materials and equipment has been significantly impacted, increasing the lead time for repairs and delivery times for large or complex items of machinery. The adequacy of the indemnity period for BI is of vital importance and something power companies will not readily compromise on in exchange for premium savings.”
Rupert Mackenzie, head of global natural resources, WTW, added: “Making strides in a softening market will demand renewed focus on getting valuations right, investing in risk engineering for ageing assets, and managing supply chain volatility through contingency plans. (Re)insurers will need to lean into power companies’ specialist knowledge of operations and technologies to really understand their risks and find solutions that are commercially reasonable. Power companies are encouraged to present their risks with transparency, to help (re)insurance markets understand the technologies and risk controls to right-size the cover. With the market approaching a new phase, the value of getting this approach right is essential to take full advantage of opportunities. The better the market understands the client’s business, the more accurate and flexible the solutions can be.”
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