WTW's latest analysis on the Energy Market Review highlights a significant disparity in the appeal of clients within the energy insurance sector, particularly amidst current global uncertainties.
According to the report, while the sector remains steady, it shows a clear preference for top-tier clients, creating obstacles for smaller clients with less desirable profiles.
The study also notes a trend where insurers are concentrating their growth efforts on high-value upper-tier business due to market competitiveness. This trend has widened the gap in market conditions, benefiting preferred clients but making it challenging for others to secure favorable terms.Graham Knight, WTW's global head of natural resources, recognizes the increasing gap in client desirability.
"This is positive news for top-tier clients as competitive pressures may lead to more favorable rate trends in 2024. However, it could pose challenges for smaller clients with less appeal in securing adequate capacity," he stated.
Despite the market dynamics, WTW's findings reveal a resilient energy sector with a consistent presence of insurers. Carriers' focus on profitable segments and risk data has led to a convergence of risk appetites.
The mismatch between demand and upper-tier business availability could prompt clients to reassess their positions in the market and potentially trigger the exit of smaller carriers reliant on top-tier business volume.
Insurers are actively addressing ESG issues, supporting clients in transitioning to new energy technologies and managing associated risks. They are prepared for upcoming technologies like carbon capture and hydrogen.Looking ahead, Knight emphasizes the importance for risk leaders to anticipate and manage emerging risks in the evolving energy landscape.
"Risk leaders must consider long-term emerging risks in 2024, as factors such as the energy transition, geopolitics, and macroeconomic changes align to present new challenges. Adaptation and strategic decision-making will be crucial," Knight stressed.
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