Global risk advisor, insurance and reinsurance broker Willis Group has revealed that energy companies have no insurance against major cyber attacks and that theoretical insurance capacities in the oil and gas insurance markets have increased to their highest ever levels.
Willis’ annual Energy Market Review has revealed that competitive pressures in the energy insurance market has increased owing to over-capitalised global (re)insurance markets combined with new capacity from non-traditional providers such as pension funds, hedge funds and investment banks.
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According to the report, which noted that the energy loss record was no worse than average total in 2013, upstream market capacity and the equivalent downstream total are at $5.7bn and $4.6bn respectively.
Lloyd’s of London statistics suggest that the overall energy premium pool that is available to insurers may be reducing for both markets.
With these conditions in place, the insurance broker expects that it may take more than a run of catastrophic losses to provoke any major capacity withdrawal from the sector. The Willis Energy Loss Database recorded only a handful of losses in excess of $200m on the upstream side, and despite three serious incidents in Argentina, the US and Canada, the loss record continues to improve on the downstream side.
Willis Group natural resources global head Alistair Rivers said that capital providers are likely to maintain their funds in the (re)insurance markets at least for the short-term, as there are no alternative investment opportunities emerging, and low interest rates are prevailing globally.
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By GlobalData"In previous market eras, we have always found that a major catastrophe or series of losses, for example, Piper Alpha, 9/11 and the 2005 Gulf of Mexico hurricanes, has led to a withdrawal of capacity and harder market conditions," Rivers added.
