Largely flat market conditions have prevailed throughout the third quarter of 2018 for the energy re/insurance sector, according to a new quarterly report by Lloyd & Partners.
In terms of upstream energy, loss severity and frequency remained unusually low, resulting in many insurers posting their best loss ratio percentages ever, while clean renewals now generally trend at around +2.5%.
However, the market is being negatively impacted by increased material claims activity, insufficient capacity at the margin to complete placements, and lack of appetite from captive insurance companies to support policies outside general consensus pricing, Lloyd & Partners said.
It added that the upstream markets continue to be corroded by the low levels of premium available, and said that it may be another eighteen months before an adequate upswing is felt by the insurance market.
In the downstream energy sector, rates fluctuated by plus or minus a few points throughout 3Q 2018, but the report noted that this was largely due to programmes with hang over rates from post loss experience that remain attractive to new capacity or budgetary pressures.
Flat renewal rates also prevailed for U.S domiciled clients in the energy casualty sector, with insurers charging increases in premium in line with any upward exposure movement.
Lloyd & Partners noted that some key international casualty underwriting teams are reviewing portfolios and placing an emphasis on moving away from under-rated business, although this has yet to have a direct impact on the rating environment due to the continuing abundance of capacity.
Going forward, Lloyd & Partners expects further M&A activity in the energy re/insurance sector to provide some headwinds in terms of premium dollars lost to the market, as well as a tightening of discipline and a reduction of options for clients in terms of their distribution chain.