Published on 19 February 2025

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Energy Casualty Market Update H1 2025

Published on 19 February 2025

Reinsurance renewal trends shift as 2024 ends, with slowing price increases and tightening capacity in key sectors. US-exposed international accounts face heightened scrutiny, while Fac market hardening limits risk transfer options. Opportunities emerge in offshore construction, while US energy liability sees London gaining traction amid domestic insurer retreats.

International Casualty

In the latter half of 2024, the pace of renewal price increases has notably slowed, transitioning from mid-to-low single-digit rises in the first half of the year to a flat trend by year-end. Early headlines from the January 1, 2025, reinsurance treaty renewals suggest increased pressure on front-end insurers as we head into Q1 renewals.

International accounts with US exposures are now approached with heightened caution due to the rising frequency and severity of US-originated claims. Historically, international markets have relied on facultative reinsurance (Fac) to mitigate US exposures. However, 2024 witnessed significant hardening in the Fac market, characterized by reduced capacity and substantially higher rates, rendering this ’buy out‘ method unfeasible.

Other constrained capacity areas include bushfire and Canadian oil sands, where the market favors insureds with solid market relationships and a robust sustainability/ESG philosophy. The market has seen increased opportunities in offshore construction and decommissioning business. Adequate capacity is available for insureds who can demonstrate proper risk management practices through the employment of competent contractors and marine warranty surveyors. Given the complexity of these projects, insurers scrutinize these aspects rigorously before offering coverage.

US Energy Casualty

Domestic insurers continue to retreat from the umbrella space, leading to an influx of inquiries to London, including from those who have not previously utilized overseas markets.

The auto insurance sector remains challenging. Some view this exposure as relatively short-tail, with claims being settled within 12 months of occurrence. This rapid payout cycle is prompting insurers to reassess their cash management strategies. Telematics and in-cab cameras are now deemed essential technologies, and even modestly sized fleets are being scrutinized for their auto risk management practices. For larger fleets, domestic markets are starting to aggregate auto limits, presenting new opportunities to London where a creative market exists for structured aggregated deals. Both insurers and insureds are keen to avoid courtroom battles, preferring settlements to mitigate the risk of punitive damage awards. This shift has led to significant settlements being reached at the courthouse steps, further driving up claim values.

New start-up capacity has alleviated pressure, providing much-needed flexibility in the market and filling gaps in programs created by incumbent capacity fluctuations. The lead USD25 million umbrella capacity remains challenged, but London has benefited from a substantial increase in submissions and bind orders. High excess capacity is relatively stable, contingent on the exposures and subclasses within the energy, power and renewables sectors. Wildfire-exposed accounts remain particularly challenging.