Published on 06 July 2023
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Power Energy Insurance Market Update 2023
Published on 06 July 2023
Conversations between underwriters and brokers have been dominated by the significance of global inflation and its effects on the sufficiency of total values.
In the past, the first question in a renewal negotiation would have been about loss history, but now it is about how values have changed from year to year. Underwriters approach this topic with a specific sense of caution, and recently it has been suggested that the loss quantum of some claims has implied inadequate values.
Utopian thinking would have all clients do formal valuations, and while this is preferred, it is acknowledged that this is not always practical. In the absence of considered input from the client on the appropriateness of their values, insurers are adopting a range of defensive strategies, such as imposing limitation clauses, stringent averages, and/or rate inflation. Given the shifting global economic landscape, we are assisting our clients in demonstrating their knowledge of this issue.
Another area that is coming under increased scrutiny is the lead time for replacing essential pieces of machinery and equipment. Supply chain concerns are also having a direct influence on the availability of vital components and, as a result, on Business Interruption claims.
The challenges facing the 1/1 Treaty renewals for 2023 have long been known. This began to show throughout the first and second quarters, with both renewals and new business experiencing significant challenges. All the signs of a hardening market are there, including an increase in rate, caution in the deployment of capacity, limitations on cover, and most crucially, a scarcity of catastrophe capacity. We have seen a noticeable increase in the demand for parametric products recently as an alternative to traditional catastrophe insurance and are delighted to provide our clients with the information and guidance that our Data Analytics team can offer.
A high quality and detailed risk presentation is now a prerequisite to a successful placement, with this being underwriters’ first point of triage. Our goal is to assist customers in creating a high-quality renewal presentation that includes a clear discussion of values and an in-depth analysis of the ESG philosophy. In an attempt to better help their business, we also give our clients complete access to our in-house risk engineering services.
We remain engaged in the coal industry, supporting a wide range of clients in an increasingly tough market environment. Although coal is a primary fuel source in several regions of the world, clients appear to be becoming more aware of the difficulties concerning the Insurance market's position. We encourage our clients to maintain ongoing discussions and long-term relationships with their capacity suppliers in order to assist them in "future-proofing" their organisation.
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Jon Parker
Jon started his career in 1989 with C E Heath within the International Property division. During his 15 years there, he lived and worked in Mexico in 1996 / 1997 before returning to London to join the newly formed Power Utility team where he specialised in the placement of Latin American power business. At the time of his departure in 2004 he was the Executive Director running the Global Power Utilities team.
Jon had subsequent spells at HSBC (Executive Director, International Property Division specialising in Power business) and Guy Carpenter (SVP, Head of Latin America) before joining the Onshore Energy team at Cooper Gay (now Ed Broking) in 2000. There he worked on Power, Oil and Gas and Mining business across the globe but still maintaining his geographical interest in Latin America. By the time he left to join Alesco in 2021, Jon was the Head of the Downstream Energy Division.
