Energy insurance sector capacity at record levels: Willis
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LONDON — Capacity for both the upstream and downstream energy insurance markets is at record levels, according to a report published Tuesday by Willis Group Holdings P.L.C.
Total theoretical capacity for upstream risks currently stands at $5.7 billion, while total theoretical capacity for downstream oil and gas risks is $4.6 billion, according to the report.
Increasing competition from both traditional insurers and nontraditional capital providers means rates are softening, according to Robin Somerville, global communications director for Willis' energy business, speaking at a presentation of the report's findings Tuesday in London.
According to the report, “Energy Market Review 2014,” it likely would take “more than a run of catastrophic losses to provoke any significant capacity withdrawal from the energy sector.”
The energy sector is particularly vulnerable to cyber attack, according to the report, because, among other things, energy companies typically are large organizations with global footprints and complicated information technology systems that often include a significant proportion of legacy IT and joint ventures, the report noted.
Currently, cyber typically is excluded from energy insurance policies, noted Mr. Somerville.
And while coverage is available via cyber policies, those policies' ability to respond to a major catastrophic event involving significant physical loss in any sector remains largely untested, he noted.
According to the report, however, coverage for terrorism and cyber terrorism is available via the Bermuda-based energy mutual Oil Insurance Ltd. and through Chrysalis, a London market upstream energy facility.
A “fledgling” standalone cyber insurance market for energy risks has begun to form in the Lloyd's of London market, in particular, in recent months, the report noted.
