Energy insurers have recently been strengthening their position in the market by expanding their energy portfolios with new appointments. The thinking behind this appears to be that companies are keen to be ready in order to capitalise quickly amid expectations that market conditions will improve.
Given the low oil prices over the last few years, there has been a noticeable downturn in both activity and returns for a number of insurance buyers in the energy sector. The knock-on effect of this has been significant contraction in premium spend. New capacity has also been pulled towards the energy market as a result of the lack of any significant events in the Gulf of Mexico.
However, it was recently reported that Zurich was the latest re/insurer to boost its offering in the sector. Others include Chaucer, Endurance, Beazley and CV Starr.
Therefore, with high capacity and low activity, the environment may not be the most encouraging in terms of growth and yet the energy sector continues to draw new entrants. It is also probable that competition will increase and there will be a corresponding pricing pressure and reduced returns.