Oil & Gas

Positive market performance creates stable underwriting environment

The market conditions for Upstream risks have stabilised, with the insurance marketplace remaining steady and predictable, largely due to a positive performance of the class. Theoretical market capacity sits in excess of USD 9bn, up on previous years as a result of new entrants and increased deployable capital from existing players, as we continue to see a widespread push for growth and a fight over market share. This increased competition creates further downwards pressure on rating. Upstream insurers’ risk appetite continues to be differentiated across the various sub-classes, with exploration and production (E&P) operators (on and offshore) holding the largest following and, at the other end of the spectrum, market capacity for hydraulic fracturing and saltwater disposal service providers remains restricted. Environmental, social, and governance (ESG) and the emerging market of energy transition (carbon capture, utilisation, and storage) continues to drive inter-insurer posturing. However, with few large-scale projects having been executed globally, a formalised insurance offering and defined carrier panel has yet to be established.

Similarly to the Upstream market, appetite for midstream risks remains buoyant, bolstered by ambitious growth commitments and increased deployable capacity of existing insurers. The rating environment has remained steady, but recent wildfire related losses have drawn attention to policy coverage, specifically ‘Denial of Access’, and we’ve seen the market adopt a wholesale shift to restricting coverage.

For the Downstream segment, Lloyd’s of London is taking a more decisive approach across the full spectrum of risks and is now looking to increase its influence and control by offering leadership options. This is a departure from Lloyd’s’ previous approach of providing support capacity to company markets. That said, this is largely based on the market’s condition to secure a line in full to protect its written share in risks.

Offshore projects (construction) and non-subsea offshore construction face challenges in relation to securing insurance, most notably due to a trend towards large capital expenditure (CAPEX) projects with high insurance capacity requirements. For these large projects there is usually a keen market appetite on the excess layers of large placements, with primary coverage being less sought after but still available if the pricing is deemed adequate by insurers. However, clients purchasing subsea construction policies will not have the same experience. It is one area of the upstream energy market that has hardened rather than softened during the first half of 2024. Even projects with modest values can struggle to attract insurer interest. The main reason for this is the sector’s loss record. High profile and high quantum subsea losses in Turkey, Mexico and elsewhere have cost insurers significant amounts in claims and have reminded them of the risks inherent to this class of insurance. The claims record has been exacerbated by the driving down of subsea rates to the point at which many insurers see the premium income as inadequate for the almost certainty of claims activity in their book. Due to the volatility of the class and losses, some insurers have chosen to withdraw from writing or have reduced their capacity for subsea construction in recent months. This includes a number of high-profile insurers who could previously have been relied upon, such as Zurich, Aspen, Swiss Re and Norwegian Hull Club.

Changes in policy terms and conditions

A relatively benign catastrophe (Cat) loss environment for Upstream has attracted more capacity and created a competitive insurer landscape and meaningful headwind for insurers seeking higher rates. As a result, we’ve seen rate rises taper off year-to-date. For attractive/target business, such as upstream operator risks, we’re typically seeing insurers agreeable to flat renewals. Further improvements can be achieved for large, well-performing, offshore operators. Recent broker tender processes, for large national oil companies (NOCs) or similar, have also highlighted adequate insurer optionality to secure material cost reductions.

The rating environment for midstream remained steady throughout 2023, with markets pushing for mid-to-higher single digit rises. However, we’ve seen this taper off in the first half of 2025. The key area of focus for midstream insurers has been coverage and narrowing ‘Denial of Access’ and civil and military authorities’ coverage.

Some markets are trying to impose the new Downstream LMA 5515A – Business Volatility Clause which addresses business interruption (BI) partial losses. It is a version that puts underwriters in a better position with regards to BI losses and Munich Re is advocating for it. Brokers are pushing hard against it.

Offshore projects (construction) subsea rates and deductibles have seen some increases over recent months. It remains to be seen if this is enough to attract insurers back to the class. If there is an operational relationship between the buyer and an insurer, then this can be leveraged to gain support.

Underwriting changes

Alchemy has entered the Upstream & Midstream market with USD 50m in capacity. Sara Valentine is heading up the Upstream team, following a 20 year tenure at Brit Syndicate. Canopius has joined the Downstream class with a circa USD 50m in capacity. James Keens, former QBE underwriter moved to Canopius to start a book as Head of Downstream Energy.

People moves in Upstream and Midstream

Chris Touhey – Moving to IQUW from Liberty where he held the position of Head of Upstream Energy Victoria Hopgood – Joined Sirius Point from Liberty

John Hopper – Moved to Sirius Point following a stint away from the market

Mike Green – Moving to Alchemy from Beazley

Victoria Burnell – Joined Beazley from Kiln

Alex Barnes – Moving to Kiln from Beazley

Richard Dare – Moved to Probitas from Convex

Alex Rowe – Leaving Travelers to set up a new managing general agent (MGA)

Balal Khan – Joining Liberty from Brit

Notable claims

In Upstream, the deep-water Gulf of Mexico has experienced a number of incidents linked to drilling operations. Three of these have been linked to a single operator. Whilst these haven’t been significant enough to cause a material market shift, offshore overall equipment effectiveness (OEE) rating adequacy has been put under the spotlight. There have also been two large offshore platform fires, both Pemex operated, with total recovery at around USD 1bn. Whilst the severity and frequency of these losses is a concern for the Upstream market, these are viewed as isolated and not as broader market influencing events. We’re heading into the Gulf Named Windstorm season, and we expect it to be an active one. Should losses arise in the Gulf then this will likely have a material impact on market dynamics through the remainder of the year.