According to a report from the global advisory, broking and solutions company, WTW, the initial feedback from insurers regarding January 1 reinsurance renewals for US casualty energy market has not been positive.
The treaty renewals have been affected by losses resulting from a combination of various factors such as events in Ukraine, overall claims inflation, high nuclear verdicts in the US, and above-average losses from global natural catastrophes in 2022.
“As a result, many insurers are expecting increases in reinsurance retentions across their respective product silos as well as potentially substantial premium increases,” WTW noted.
In 2022, there was an increase in Global Liability capacity, continuing a positive trend after reduced offerings in 2019 and 2020. In 2023, overall capacity has remained stable, but the US market has seen some reductions, with some insurers closing their Energy books.
However, capacity in London and Bermuda remains “mostly stable” after increasing in 2022, despite a reduction of nearly $25 million in available limit in the US market.
Capacity remains high for the Oilfield Services segment, with no decrease expected in the US or London markets, despite increasing severity of employee injury claims and alarming Auto Liability judgements.
The Upstream Primary Liability market is facing challenges in the Offshore segment but has ample capacity in the Onshore market, with Excess Liability limits remaining stable in London and Bermuda.
Despite some severe losses, capacity has remained stable for downstream and increased for midstream companies in the last 12 months, with consistent risk-transfer attachment levels, slight uptick in capacity for middle-market midstream business, and single digit rate increases for profitable programs in 2023.
“Primary Liability capacity remains stable and many insurers have aggressive new business goals for the 2023 fiscal year. Buyers with clean loss records are seeing very favorable results when marketing efforts are conducted and favorable early renewal negotiations can be agreed with incumbent insurers.”
In 2022, Excess Liability capacity increased, and it remains stable in 2023. Although concerns about loss severity and challenges in the Lead Umbrella space still exist, pricing volatility of the past few years has subsided, and most buyers are expected to experience single-digit rate increases. Overall, pricing is expected to continue in the same manner as during 2022, WTW explained.
Despite stable capacity and plateauing North American Energy Excess Liability pricing, insurers remain concerned about anti-corporate sentiment among juries and the normalization of larger awards and settlements. Large jury verdicts for Auto Liability are also putting pressure on Excess Liability pricing.
In addition, overall loss inflation trends are increasing each year, often outpacing the overall increases in Excess Liability rating, the company said.
