In Asia, insurance capacity from Asian-based insurers remains very strong. Over the last two years, some insurers have set up new and expanded capacity in the region due to market profitability in the downstream sector. This is coupled by an increased demand from other regional insurance hubs, such as in the Middle East and London, where insurers are looking to grow their position on Asian accounts
SINGAPORE: Driven by a delicate balance between profitability concerns and the pursuit of market share, the global energy insurance market continues to soften with capacity at an all-time high, according to the Energy Market Review published today by Willis, a WTW business.
This creates a favourable environment for energy companies in Asia in the first quarter of 2025, said the report.
Rate reductions are ramping up in the downstream market following a benign loss record in 2024, with markets quickly forgetting the many years of poor performance that preceded it.
However, there has already been significant loss activity in Q1 2025 with $1.5 billion of potential losses, more than the entire 2024 year, which could impact the direction and pace of further softening in the year ahead.
As the market continues to shift, downstream energy companies can leverage soft conditions to manage volatility and those more focused on rate optimisation can stand to benefit from heightened insurer competition for top-tier business.
Overall, market dynamics are complicated. Insurers are concerned about dwindling profitability, but continue to offer rate reductions to compete for business.
Insurers are relying on their specialist underwriting teams to focus on risk selection, creating a flight to quality that has only intensified in recent years. The most favored risks are oversubscribed and receiving the best terms.
Clean energy technologies are evolving, and according to Global Clean Energy Survey 2025, oil and gas companies are prioritizing investment in carbon capture, biofuels, hydrogen and geothermal in the next five to ten years. Energy companies’ risk profiles are evolving.
In Asia, insurance capacity from Asian-based insurers remains very strong. Over the last two years, some insurers have set up new and expanded capacity in the region due to market profitability in the downstream sector. This is coupled by an increased demand from other regional insurance hubs, such as in the Middle East and London, where insurers are looking to grow their position on Asian accounts.
This creates pressure on incumbent panel insurers to offer the most competitive renewal terms for energy companies in Asia or risk losing out on placements due to the influx of additional capacity.
In the upstream market, growth of around 5% in capacity has been driven by a quiet year for losses and continues to fuel a soft market. Insurers are under continued pressure to grow their market share, putting pressure on signings even when core business is placed at a significant reduction.
More underwriters are willing to take on leadership roles, further driving pricing down. Insurers are writing so much construction business that many have already filled their 2025 budget, despite this having been the worst performing part of the portfolio historically, suffering from a particularly poor loss record.
Charlotte Watts, Head of Energy, Asia at Willis, said in Asia, conditions in the upstream insurance sector are really a mixed bag due to the diverse nature of the portfolio. That can include a range of risks such as operational, construction, subsea and geothermal, each of which can be impacted by market conditions in different ways.
“Our current prediction is that overall, the soft market will persist, but we need to be mindful that a series of large losses could cause a quick change in risk appetite and the favourable rates currently being offered. Energy companies that prioritise building strong relationships with their insurers and continue to invest in risk management and engineering are the ones that will achieve the most favorable outcomes,” added Watts.
The report also highlights the growing role of energy storage in advancing clean energy transition. As electrification gains momentum, the need for reliable and efficient energy storage has become a critical focus for both energy companies and insurers. While these innovations enhance grid stability and resilience, they also introduce new risks, including supply chain disruptions and safety concerns.
Charlotte added: “2025 is a pivotal year for energy transition. Energy companies that proactively invest in risk management strategies and collaborate with insurers to develop tailored coverage solutions will build the necessary risk resilience to balance short-term investment in fossil fuels with longer-term decarbonisation plans.”
Directionally, the liability market is softening, but U.S.-exposed risks are seeing the greatest average rate increases driven by social inflation.