WTW Energy Market Review 2023
The initial feedback from insurers regarding January 1 reinsurance renewals has not been positive. Treaty renewals thus far have been impacted due to losses stemming from a combination of the events in Ukraine, overall claims inflation, increased catastrophic US nuclear verdicts and above-average global natural catastrophe losses in 2022. As a result, many insurers are expecting increases in reinsurance retentions across their respective product silos as well as potentially substantial premium increases. However, as of the time of writing many London syndicates were still awaiting their respective allocations for these increased premiums. While we do not expect “trickle down” costs to have a large impact on clean North American energy buyers, we do expect rates to continue to trend in a positive direction for many programs in the first half of 2023.
2022 provided another year of overall increased Global Liability capacity, which continued a positive trend after many markets reduced offerings in 2019 and 2020. 2023 capacity thus far appears to remain mostly stable overall, though the US market has seen some reductions in capacity, with some insurers closing their Energy books. Despite this reduction in capacity (roughly US$25 million in available limit) capacity in both London and Bermuda remains relatively stable after increasing in 2022.
The Upstream Primary Liability marketplace finds itself in a state of flux in Q2 2023. The offshore market has been especially challenging from a Primary Liability and Lead Umbrella standpoint, as one of the larger participants in this space is undergoing changes in both limit availability and necessary pricing. While there is confidence that this may potentially be resolved as the year progresses, many offshore operators are looking for alternative options as of the time of writing. While replacement capacity remains available (much of it in the London market), retentions are under pressure; this is a segment that bears watching as the year progresses, as many insurers are seeing a large influx of submissions due to the changes in this space.
Despite the challenges faced by the offshore operator segment, the onshore market has ample capacity and so buyers have a multitude of potential options for General Liability and Lead Umbrella policies. Capacity remains in both the US and London markets to provide options for buyers in this segment in 2023. Excess Liability (above US$25-50 million attachments) remains ample for both onshore and offshore operators.
Overall capacity in the US has been reduced by nearly US$80-100 million in 2023; however, buyers are still able to procure ample overall Excess Liability limits. London and Bermuda capacity remains fairly stable year-on-year, and we expect renewal rate increases to remain in the single digits during the first half of 2023, with the potential for smaller reductions in the second half of the year.
Capacity remains at extremely high levels for the oilfield services segment, despite a continued uptick in the severity of “action-over” employee injury claims and as large Auto Liability judgements continue to trend in an alarming direction in the US. We do not foresee any decreased capacity in this space in either the US or London markets and insurers appear to be seeking single digit rate increases at renewals for profitable programs. As there is ample capacity remaining in the space, many insurers are aggressively targeting profitable programs during marketing exercises, due to increased 2023 new business budgets.
The midstream and downstream segments have both experienced a few severe losses in the last 12 months; however, despite this capacity remains stable for Downstream and has increased for Midstream companies during the last 12 months, with risk-transfer attachment levels remaining consistent year-on-year.
There has also been a slight uptick in capacity for middle-market midstream business via the US market in the Excess & Surplus (E&S) space. Despite a few large losses experienced by the sector in the last 12 months, the market continues to offer single digit rate increases on profitable programs in 2023.
Primary Liability capacity remains stable and many insurers have aggressive new business goals for the 2023 fiscal year. Buyers with clean loss records are seeing very favorable results when marketing efforts are conducted and favorable early renewal negotiations can be agreed with incumbent insurers. Auto Liability rating increases remain in the mid-to-high single-digits, while Workers Compensation rates remain flat to slightly down and General Liability for most segments remains in the single digit range.
Excess Liability capacity increased in 2022 and remains relatively stable in 2023. While there are still underlying concerns about loss severity, and challenges can remain in the Lead Umbrella space, the pricing volatility of the previous few years has subsided and we expect pricing to continue in the same manner as during 2022, with most buyers experiencing single digit rate increases.
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| Title | File Type | File Size |
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| US Casualty: Capacity stable but concerns remain | .9 MB |
