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Energy underwriters getting tougher on riskiest account: Willis

Posted On: Apr. 17, 2012 12:00 AM CST

Underwriters will exercise greater discretion this year because the energy market recorded $9 billion in insured and uninsured losses in 2011, according to a report by Willis Energy, a unit of London-based Willis Group Holdings P.L.C.

In addition to losses resulting from major catastrophes such as the earthquake and tsunami that struck Japan, there also were large losses last year in the Canadian oil sands and North Sea offshore platform industries, the latest “Willis Energy Market Review” shows.

One result, according to Willis, is that underwriters now favor the most attractive business.

“Conditions in the energy insurance market are stable but fragile,” Willis Global Energy CEO Alistair Rivers said in a statement. “Insurers are differentiating even further between the risks they truly value and those they don't due to the recent losses or lack of underwriting information.”

He said it is vital that buyers provide thorough information to underwriters to differentiate their accounts and achieve the best prices and terms.

This is especially the case in the environmental impairment liability arena given the growing, controversial use of hydraulic fracturing in natural gas production.

“Despite the media attention, the market is still keen to underwrite shale gas drilling risks,” Willis said in the report released Tuesday. “However, again buyers will have to differentiate their risk by proving adherence to best practices if cover is to be provided at an economic price.”