North American energy casualty: A tale of two markets — oilfield services

Primary liability

A tale of two markets…oilfield services…and everyone else

Due to a combination of manageable primary limits (which has helped to reduce the impact of increased U.S. liability claims severity), a sharper focus on risk-transfer attachment points and an abundance of available capacity, the primary liability marketplace (workers compensation, general liability & auto liability) continues to find itself in a relatively stable position overall from both a pricing and capacity standpoint in many of the natural resources sectors in 2024. After experiencing a challenging 2023 with a major loss in primary capacity, the upstream segment appears to have stabilized as we move into 2024. Midstream, downstream, power/ renewables and chemical accounts continue to find themselves in a stable position regarding market capacity year-over-year, as ample capacity exists to provide competition which will offset an underlying need for larger rate increases in U.S. casualty. As was the case in 2023, the new-business growth goals and ample overall primary liability capacity should keep rates within low single digit increases for workers compensation and general liability as those lines of business remain profitable for most individual sectors. Auto liability remains a major concern for U.S. natural resources liability insurers, and early 2024 indications are leaning towards many carriers seeking low double-digit rate increases to offset the impact of claims inflation on their portfolios.

As we move into 2024, an area of concern that bears watching is capacity availability and subsequent renewal pricing within the oilfield services (OFS) segment, as that sector is quickly experiencing capacity and limit challenges stemming from both general liability and auto liability losses that continue to plague insureds within the industry. The OFS segment was historically one of the most competitive U.S. liability markets with ample capacity in recent years, but in 2024 OFS capacity appears to be decreasing as certain primary carriers have started to reconsider the viability of continuing to insure OFS companies as they struggle for profitability. Insureds with challenging loss histories and/or larger auto fleets are seeing more pressure on retentions and rates when capacity can be found because of increased claims inflation and litigated claims from workforce injuries and auto accidents.

Auto liability

Despite eight consecutive years of high single-digit or low double-digit rate increases for almost all clients in the energy sector, auto liability remains a large issue for most primary liability insurers and continues to be a major area of concern. While a lower ($1 million or $2 million) combined single limit helps manage severity, the industry continues to see an alarming uptick in litigated auto claims and settlements continue to increase, oftentimes outpacing rate increases from the prior year.

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