Energy and Power Newsletter — 2020 Q4

Marsh 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, casualty, 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 casualty insurance claims from COVID-19 will exceed US $22 billion, but the sector’s capitalization 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.