The loss activity in the downstream energy insurance market in 2025 is likely to influence a slowdown in rate softening this year. However, abundant capacity, ongoing pressure on premium income, increased local retentions, and greater reliance on facility placements mean that, after a predicted subdued start, the pace of rate reductions could accelerate through the first and second quarters of 2026.
In a report titled “Alesco Energy Market Update H1 2026”, posted on its website, Alesco Risk Management Services—an independent, London Market, insurance broker and risk consultancy—adds that the trajectory in 2026 will be shaped by treaty reinsurance renewals and any further loss activity, both of which could significantly impact market trends in the early part of the year.
Alesco notes that the abundance of available capacity and reinsurers’ desire to maintain, and even grow, premium volumes led to steady rate reductions throughout 2025, reaching their peak in the final quarter. Rate softening has been widespread, with reductions of up to 20% for well-engineered, loss-free risks with low natural catastrophe exposure.
However, significant loss events—most notably the PBF Martinez incident in February 2025—have pushed total loss reserves above $4bn, with some estimates suggesting losses for 2025 could reach $5bn. This is set against an estimated global premium pool of $3.5-3.75bn for the year. Major losses have predominantly affected US facilities, while Europe has seen notable incidents such as the Bayernoil Refinery fire in Germany ($757m; February 2025) and the MOL Group Refinery incident in Hungary ($450m; October 2025).
Current conditions offer buyers the opportunity to secure broader coverage while benefiting from reduced premiums. Many reinsurers have relaxed policy conditions, allowing insureds to extend protections without increasing costs. However, retentions remain firm, and while this may be seen as a positive for reinsurers, the real value of property retention levels has diminished over time due to inflation.
Regional development
An assessment of different markets is as follows:
- USA: Major losses, including those at PBF Martinez and Marathon Petroleum, have tempered the rate of softening compared to the London market.
- DIFC/MENA: The market has seen fewer losses, increased capacity, and minimal exposure to natural catastrophes. Rate reductions here have outpaced those in London and Europe by up to 10%. New entrants such as Starr and HCC have bolstered leadership capabilities in 2025, and additional players including Markel are anticipated in 2026. This development could see the MENA market become more autonomous, with all but the largest risks retained locally.
- Asia: As with DIFC/MENA, the Asian market has not experienced any significant losses and rate reductions are generally in excess of those seen in London and Europe. Regional capacity remains stable; however, reinsurers have aggressive premium growth targets, resulting in a highly competitive environment. It is widely expected the soft market conditions will continue during the first half of 2026. M