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Energy and Power Newsletter - 2020 Q4

Marsh JLT Specialty is pleased to issue the first Energy and Power Insurance Newsletter of 2021 considering the trends over the final quarter of 2020.

The energy and power insurance market provides solutions for companies operating within upstream, downstream, liability, traditional power, and renewable energy. The articles consider the nuances and trends being experienced across the various sectors.

Generally, all energy and power insurance sectors continue to experience contracting capacity, increasing rates, and tightening of conditions. The exception is the upstream sector that continues to lag because of excess capacity remaining for all but a few, very large value projects. Insurers have some common concerns, which may affect coverage – including COVID-19 or communicable disease exclusions, and restrictions on cyber cover.

The drivers from the wider insurance sector, and indeed the wider economy, all have an impact on the energy and power sector. Two such drivers are the impact of COVID-19 losses, and the attraction of new capacity to the (re)insurance market.

According to Moody’s, global property and liability insurance claims from COVID-19 will exceed US $22 billion, but the sector’s capitalisation is solid, with carriers set to absorb these commercial claims from earnings. Moody’s noted that COVID-19 claims “remain manageable” with reinsurance mitigating the impact of business interruption claims. In addition, the frequency of personal lines claims reduced during the pandemic.

According to Guy Carpenter data, there has been over US $43.5 billion of capital raises in the insurance/reinsurance sector since the beginning of 2020. This capital has entered the industry looking to take advantage of an improving trading position for insurers. This is a substantial amount of capital, however, the amount is relatively modest in the context of available insurance market capacity.

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“Marsh Pty Ltd (ABN 86 004 651 512, AFSL 238983) (“Marsh”) arrange this insurance and is not the insurer. The Discretionary Trust Arrangement is issued by the Trustee, JLT Group Services Pty Ltd (ABN 26 004 485 214, AFSL 417964) (“JGS”). JGS is part of the Marsh group of companies. Any advice in relation to the Discretionary Trust Arrangement is provided by JLT Risk Solutions Pty Ltd (ABN 69 009 098 864, AFSL 226827) which is a related entity of Marsh. The cover provided by the Discretionary Trust Arrangement is subject to the Trustee’s discretion and/or the relevant policy terms, conditions and exclusions. This website contains general information, does not take into account your individual objectives, financial situation or needs and may not suit your personal circumstances. For full details of the terms, conditions and limitations of the covers and before making any decision about whether to acquire a product, refer to the specific policy wordings and/or Product Disclosure Statements available from JLT Risk Solutions on request. Full information can be found in the JLT Risk Solutions Financial Services Guide.”