The excess number of insurers in the energy market will bring about widespread modification of coverage and the launch of new products and services as competition ramps up. More carriers will be willing to partner with agencies to present more appealing products and to pick up premium dollars through additional distribution channels. This wider range of products and services will be aimed at attracting buyers after a number of carriers jumped at the opportunity to enter the market toward the end of 2014, during the domestic oil boom, which was supported by fracking.

Big Push Out of Lloyd’s

The new partnership between CNA Hardy’s Lloyd’s syndicate and DUAL, an international underwriting agency, could write over $1 billion of gross written premiums in 2015. The three-month-old venture specializes in marine and energy business and is aimed at the off-shore industry. Ryan Specialty Group’s Global Special Risks group also taps Lloyd’s for its young Upstream Solutions Energy Package. The Upstream Solutions Energy Package provides products for oil and gas operators and non-operators of North American-based production companies.

The package offers control of well coverage with limits up to $50 million, primary general liability with limits up to $1 million/$2 million, umbrella coverage with limits up to $10 million and property coverage with limits up to $20 million. A Lloyd’s consortium led by Ascot Underwriting Ltd. specifically for the renewable energy industry was launched in May with a capacity of up to $165 million per risk. The consortium is designed to provide easy access to large scale capacity, especially for accounts working with onshore wind and solar installations.

Crittenden expects these Lloyd’s programs could see some competition from ProSight Specialty Insurance, which partnered with the North American Board of Certified Energy Practitioners (NABCEP) in March. ProSight’s program offers an insurance plan specifically for NABCEP certified solar professionals. ProSight offers solar contractors with complete coverage by combining business in general liability with professional liability coverage, property insurance, inland marine, umbrella liability, builders risk, workers’ comp and auto insurance.

Leading writers of commercial energy insurance, such as XL, Zurich, Ironshore and Travelers, will likely remain strong competitors with modification to their coverage. Earlier this year, Zurich repackaged its onshore terrorism coverage into property programs since terrorism is still excluded from most property policies. Zurich also deleted cyber exclusions to make its program more appealing.

In April, Ironshore’s Global Property Energy division increased its limits from $25 million to $35 million for all classes of business within the specialty property energy sector. It also has plans to increase sub-limits for contingent business interruption and supply chain risks. Although not a leading carrier in this segment, Berkley remains competitive. Through MGA J.H. Blades & Co. Inc. and the Swett & Crawford Dallas Energy team, Berkley joined with Wild Well Control Inc. in April to provide a rapid response program for Blades & Co. policyholders. This program strictly focuses on early intervention pollution control and mitigation for all sectors of the U.S. energy market.

Carriers’ adjustments to policy language will also likely relate to weather, one of the primary drivers of claims in the energy market. Most energy operations face extreme weather conditions due to the off-shore locations and on coastlines. Storm surges, though uncommon, are not yet adequately addressed yet still a constant threat to off-shore power production facilities. Cyber-attacks are also a concern, leading to some carriers to begin removing cyber exclusions from policies.

Copyright © Crittenden Research Inc., July 20, 2015