Offshore Energy underwriters have enjoyed an upward trend in global premiums since 2019, with the 2022 premium base being reported as $4.1bn at the 2023 International Union of Marine Insurance (IUMI) conference, being held this year in Edinburgh.
The uplift of 7.3% was largely reflective of the oil price and the corresponding increase in offshore activity, particularly jack-ups and deep-water vessels. Inflation and its impact on asset values was also a factor, noted Melanie Raven, Vice Chair of IUMI’s Offshore Energy Committee.
As is invariably the case with offshore energy, macroeconomic and geopolitical changes continued to be significant, including ongoing concerns over energy security, with no end in sight for the war in Ukraine.
Over the coming few years, the fundamentals of the offshore energy insurance market were likely to shift much more significantly than other insurance sectors. “As we approach peak oil, the growth in lower carbon technology is now accelerating. Floating wind capacity, as an example, is forecast to grow exponentially over the next few years as increased levels of investment are injected. The move to a low carbon future represents a fundamental shift for offshore energy underwriters and this will reach farther and deeper into our sector of insurance than any other”, she said.
The evolution of energy production would give rise to a new set of technologies, with new risks that will need to be insured. But offshore energy underwriters can draw on past experience. “Although we are facing a very different future, we are not having to reinvent every wheel”, said Melanie Raven, adding that “carbon capture and storage facilities are likely to feature large over the coming years but underwriters in our sector are used to insuring subterranean structures. It shouldn’t be a great leap for us to provide cover for these new facilities.”
Upstream sector remained abundant and for many the oil and gas sector remained an important part of an insurer’s portfolio, Raven said.
She noted that “lower carbon solutions are moving very quickly and insurers must keep abreast of change and remain agile in order to respond to industry demands. We need to continue to support our customers with their existing needs as well as innovate and re-invent our insurance products so they remain fit-for-purpose. Insurance must be an enabler and not a blockage in this vital energy transition process”.