Page 20 - 2016 State of the Market from AmWINS
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20 | Am1W8 IN| SASmtaWteINoSf SthteatMe oafrktehte Market
INDUSTRIES
ENERGY & MINING
Pricing war continues in energy and mining even as sector
struggles with bankruptcies and decline
Last year, abundant capacity was In upstream, underwriters are competing division of THB Group in London.
producing extremely soft pricing and for fewer accounts because the London is a participant in all areas of
buyer-favorable terms across the energy significant decline in barrel prices the energy market and continues to be
and mining insurance markets. With few continues to drive energy producers out strongest in upstream and midstream
exceptions, those conditions have either of the market or even into bankruptcy. accounts. “We are in a market share fight
continued or intensified in 2016. to the extent where smaller syndicates
As pricing levels have dropped, some that traditionally don’t lead business are
ENERGY underwriters have begun to look at this moving into a position where they can
sector more cautiously. Most notably, lead, and other syndicates will follow
Rates, particularly in energy-related Allianz pulled out of the domestic market them. Traditional underwriters in this
casualty, have been under severe for first-party upstream/over the hole space no longer have the exclusivity to
pressure for the past three years. exposure. The number of exploratory hold the market. The undercut war is on,
Reductions of 20 percent or more are and developmental wells tumbled from and everyone is writing for income rather
common, with the exception being nearly 2,000 in late 2014 to fewer than than for profit,” Neighbour says.
accounts that are near or below their 400 earlier this year, while oil storage is
technical levels. Well-performing property at near-record levels.7 Additionally, a trend toward sidecar
accounts can expect to see near double- development is increasing capacity.
digit decreases. Still, underwriters have not been scared “Sidecars impact all industries, but
off by large upstream losses in the energy in particular. They put additional
“The electric utility marketplace in energy sector, including a Tullow Oil pressure on rates because it’s cheaper
particular is as soft as we’ve ever seen business interruption claim likely to be in capacity,” says Alistair Barnes, executive
it,” says Heath Cunningham, executive the billions of dollars and a 2016 incident vice president and property broker at
vice president and casualty broker at where production equipment fell from a AmWINS Brokerage in Houston, Texas.
AmWINS Brokerage in Atlanta, Georgia. Stena Oil platform to the ocean floor.
“Carriers are looking for a greater market Two exceptions to the price-driven
share, which continues to drive rates “At this point neither of those losses underwriting trend exist. With pricing
lower.” seems to have had much of an impact,” already thin on fracking accounts,
says Rob Neighbour, broker in the energy underwriting appetite isn’t at the level
7 U.S. Energy Information Administration
