Underwriting Offshore Energy Risks: supporting clients going into new and difficult waters

30 May 2016

This report shares insights in the evolution of the global offshore energy business, the concurrent development of the re/ insurance products to support its growth, the lessons learned from both manmade and natural catastrophes and the challenges posed by the rapid expansion into ever more difficult waters.

Download the publication (PDF / 900KB)

As the number one reinsurer in the global marine and offshore energy business, we constantly strive to strengthen our expertise and product knowledge and to share it with our clients. Together with David Sharp, leading expert and author of the book Upstream and Offshore Energy Insurance, we published a market report named Underwriting Offshore Energy Risks.

The report explores the development of the offshore oil industry and insurance market, how manmade and natural catastrophes reshaped the industry, the formation, exploration and development of oil and gas fields, the key policy forms, and the accumulation risk in offshore energy.

It concludes that the re/insurance industry remains in good shape, notwithstanding soft market conditions, to provide the capacity and support to the offshore oil industry for the immediate future. There will continue to be challenges as exploration and production expands into ever-deeper, more remote and inhospitable waters. Drilling in these environments may require policy limits for control of well in excess of currently purchased limits. There will be technical challenges to surmount, ranging from floating LNG production systems to ice resistant platforms. Policy limits in excess of current market practice may be required for floating production systems that could challenge the market’s capacity.

The Gulf of Mexico remains a top exposure for offshore energy due to both natural catastrophe risk and value concentration. Nonetheless, the lessons learned from both natural and manmade disasters in the Gulf of Mexico are applicable to the fast evolving oil industry in other regions, especially in emerging markets. It is imperative that re/insurers learn from and avoid the mistakes of the past. The industry must invest in the tools necessary to properly map and estimate exposures in other regions such as Asia. The quest for data will be a never-ending challenge. Nonetheless, it is an essential task to ensure that the re/insurance industry is sustainable in order to support the oil industry as it ventures into new and ever more dangerous waters.