Upstream energy clients were increasingly favouring automatic capacity over traditional follow-only markets, according to George Richardson from broker WTW.
This was because of its lack of differentiation between poor-performing construction classes, he said.
Willis’s global head of natural resources, Rupert Mackenzie, warned that challenges to insurers’ profitability were increasing. Energy insurers were chasing market share at the expense of profitability as competition intensifies across the sector, according to Willis’s latest Energy Market Review.
The report said the energy insurance market was continuing to soften. Capacity was at a record high and rate reductions were gathering pace in both upstream and downstream.
The downstream insurers had been cutting rates aggressively following a benign 2024. WTW claimed that underwriting discipline had fallen by the wayside amid a rush for business.
The report noted however that $1.5bn in potential losses had already emerged during Q1, exceeding the full-year total for 2024. That inevitably raised the question as to whether the current pace of softening was sustainable even in the short term.
Upstream capacity had grown by around 5% after a quiet year for losses in 2024.
Underwriters were both competing for signings and were increasingly willing to take on lead positions, said WTW, noting that some insurers had already exhausted their construction budgets for the year.
The review identified energy storage as an emerging area of focus, with growing demand linked to the wider electrification and decarbonisation agenda. However, storage technologies brought new exposures, including supply chain risks and safety concerns.