Published on 19 February 2025
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Downstream Energy Market Update H1 2025
Published on 19 February 2025
In 2024, the Downstream market experienced the anticipated softening, although some losses from 2023 continued to worsen. The pace of this softening gained momentum throughout the year, with regional variations observed in market conditions.
Several key factors contributed to the softening trend. The year saw benign loss activity, with low operational and natural catastrophe losses, which positively impacted underwriter profitability. Despite an active natural catastrophe season, the insurable losses were insufficient to significantly affect the Downstream market. By late December 2024, operational Downstream energy losses totaled approximately USD600 million, with the Greek Refinery fire in September potentially adding over USD500 million to the total. Overall, the global loss amount is expected to be one of the lowest in recent history. With an annual global premium for Downstream projected at USD4.25 billion, 2024 is shaping up to be one of the most profitable years in recent memory.
Market capacity remained stable throughout the year, with no significant withdrawals from insurers. Canopius, a notable new entrant to the Downstream market in recent years, is expected to increase its capacity in 2025, adding more competition. Furthermore, other insurers are also anticipated to expand their working capacity in the coming year, putting additional pressure on rates. As insurers strive to maintain market share and premium income, high-quality accounts are likely to experience greater demand and oversubscription, allowing brokers to negotiate improved terms and conditions.
Global capacity dynamics are also set to play a significant role in shaping market conditions in 2025. International hubs, such as the Middle East and Far East, are expected to experience considerable rate reductions and broader terms. Meanwhile, London and European underwriters will need to adapt to these changes to maintain their share of global risks.
Despite these softening conditions, lead markets are expected to maintain underwriting discipline, particularly when it comes to ensuring accurate value declarations.
Over the past year, Business Interruption (BI) losses have consistently outpaced Property Damage (PD) losses, highlighting the importance of precise BI value declarations. The LMA 5515 clause has become standard practice, helping insurers minimize uncertainty around potential BI claims. Regular adjustments to BI values will enable insurers to assess risk exposure more accurately and apply appropriate premiums. Additionally, insureds must ensure accurate PD valuations by using independent valuation experts to avoid average clauses being applied to policies.
Environmental, Social and Governance (ESG) issues remain a critical consideration, especially in the European market. These concerns could affect capacity deployment, with some major downstream insurers potentially restricting capacity in certain sub-sectors, despite the overall availability of abundant capacity.
This evolving landscape underscores the importance of accurate valuations and careful risk management as insurers navigate the shifting dynamics of the Downstream market in 2025.
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Glyn Davies
Glyn began his career at Jardine Insurance Brokers International Limited in 1994 where he worked in the Energy Division and gained experience in all areas of the business from Broking and Account Management right through to Policy Wordings and Claims Settlement. In 1999, Glyn moved to the Energy Division of Aon Ltd where he worked as an Account Executive for various large North American and Latin American Clients. Glyn was promoted to the role of Director in 2008 of the then Aon Natural Resources and Construction Division. He joined Alesco Risk Management in August 2009.
Over the course of Glyn’s 28-year career, he has gained valuable experience in all areas of the business including, Onshore and Offshore Energy and Power risks (both Construction and Operational), Hull and Cargo, Marine Liability, Control of Well, Employers Liability and Business Interruption programmes. Glyn has experience in providing Technical skills for Energy and Power clients, including programme design and marketing strategies, and all aspects of day-to-day client servicing.
