Now that the downstream insurance market has turned, buyers can expect the current state of affairs to continue for some time yet and should adjust their expectations accordingly, says Mr Steve Gillespie, head of downstream broking at Willis Towers Watson (WTW) Natural Resources in London.
In an article in Energy Market Review 2020”, published by WTW, Mr Gillespie said, “We see no sign of any end to the hardening process at present, and certainly no indication of any fresh competition that would threaten insurers’ resolve to bring market rating levels back to what they consider to be profitable levels.”
Capacity increases prevalent in the last soft market (2010–18) have been steadier than in previous eras. So market dynamics have become more of an ocean liner – heavier, steadier but more difficult to stop – rather than a speedboat, capable of turning on a sixpence.
Mr Gillespie says that it is worth pointing out that, even with two years of rating increases under their belts, rates are still only back to where they were five years ago - halfway through the last soft market.
He added, “As we stated in last year’s Energy Market Review, even at these inflated rating levels compared to 2018, the Downstream market continues to offer clients excellent value for money.
“So in the absence of any additional competition, and in light of the performance of other areas of the Heavy Industry portfolio, buyers and their brokers will have to work together to offset the worst effects of this continued market hardening. This will involve working as a partnership to develop the right strategy to offset this process; it may involve the increased use of risk engineers, forensic accountants, analytics specialists and others.”