An energy cartel? Top insurers have one, global broker WTW warns
Insurance coverage for the energy sector has more than a touch of oligopoly, with precious few new entrants daring to step in to challenge established leaders for energy covers, global brokerage WTW has warned.
“It is challenging to find insurers willing to ‘break ranks’ and offer more competitive terms than those provided by the existing leadership panel,” WTW analysts wrote of the insurance market for upstream operations.
The upstream coverage market is led by “established market leaders” and shows a historical tendency to buoy prices. Data suggests it takes a “surprisingly long time for increased market appetite to translate into real downward pressure on prices.”
“As time goes by, it seems that there are fewer and fewer insurers prepared to challenge their [market leader] positions and it is becoming increasingly challenging for brokers to generate any meaningful following for alternatives outside the recognised panel.”
Likewise, the insurance segment for downstream energy operations, less dominated by London and historically showing more responsiveness in capacity, hasn't come to life following the hard market, WTW analysts noted.
The days when hard market peaks brought “an immediate and rapid softening” appear to be gone.
“Instead, the existing leadership panel remains largely intact, thereby limiting the opportunities to generate additional competition and ensuring that rating levels, at least to date, have remained largely where they have been at the top of the hard market,” WTW analysts wrote.
“We have not seen any fresh competition emerge to challenge the positions held by the established market leaders.”
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