Soft characteristics of energy market likely to diminish: Willis

The energy market will likely see the “softening dynamic” slow or come to a halt following the Japan earthquake and tsunami, Willis said in its Energy Market Report.
“For example, some insurers have issued statements that they will not be offering any rate reductions on business; any exceptions will require executive referral and extraordinary circumstances,” the report says.
“Other insurers have indicated that they wish to review their portfolios in some depth before deciding on how to develop their underwriting philosophy.”
Willis went on to suggest that some insurers may attempt to artificially limit their capacity, citing an overall reassessment of their participation in classes, such as energy, which are characterised by low frequency, high severity losses.
But, given the abundance of capacity in both the upstream and downstream markets, Willis asks how long this “straight bat” approach will last.
The vast majority of insurers in these markets renew their reinsurance treaties at Jan. 1, and have already paid for reinsurance until Jan. 1, 2012, Willis noted.
“With capacity intact for the remainder of the year, and with any resolution of Japan earthquake claims months off at best, it could be argued that the overall dynamics in both markets remain unchanged for the moment – despite insurers’ natural protestations.”