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U.S. energy insurance buyers can expect continued rate increases and underwriting scrutiny as higher losses continue to hit the market and inflation drives more costly claims, according to a report Thursday from Amwins Group Inc.
Social inflation is impacting every sector of the energy market, with claims costs and jury verdicts rising “exponentially,” Amwins said in the report.
Most downstream energy insurance buyers are facing rate increases of 5% to 10% as inflation and supply chain issues continue to push loss settlements above value for physical damage and business interruption, the report said.
Insurers are also continuing to reduce natural catastrophe limits and passing along higher reinsurance costs.
Premium increases for loss-free non-catastrophe exposed downstream accounts are running from 7.5% to 12.5%, while loss-affected accounts are seeing increases of at least 10% to 30%, along with coverage and deductible changes, the report said.
Loss-free accounts in the midstream energy sector are also seeing rate increases of at least 10% while accounts with minimal claims exposure are facing increases of up to 20%.
Upstream energy accounts could also see rates rise at a steadier pace in the next six to 12 months, Amwins said.
“Underwriters have been talking about narrowing coverage and moving away from bespoke wordings — both potential signs of a hard market,” the report said.