Energy insurance rates continue to decline despite $6.8 billion in downstream losses, rising claims trends and record capacity levels exceeding $10 billion.
The global energy insurance market is showing a sustained disconnect between loss experience and pricing direction, with rates continuing to fall across upstream, downstream and liability lines even as claims activity rises, according to analysis from Willis, part of WTW.
Downstream losses totaled $6.8 billion in 2025, with net losses estimated at $4-4.5 billion. Refinery incidents accounted for the largest events in a segment generating only $2-2.5 billion in annual premium. Additional losses at the end of 2025 and an early 2026 event estimated at $250–400+ million have added further strain.
Despite these figures, pricing continues to decline. Global downstream premium remains around $3–3.5 billion, leaving underwriting results under pressure while competition persists.
“As 2026 progresses, the energy insurance market remains highly favourable for buyers. Deteriorating loss trends, whether from heavy downstream refinery losses, upstream construction tails or liability claims inflation have not yet driven corrective hardening. Loss severity remains insufficient to counteract broader industry capital oversupply, arguably leaving pricing disconnected from underlying risk. With commodity price volatility potentially an ongoing issue in the coming quarter, we would urge buyers to review their business interruption declarations to ensure they can make a full recovery should an event occur,” said Rupert Mackenzie, global head of natural resources at Willis.
Capacity remains the dominant force shaping market conditions. Upstream capacity has exceeded $10 billion, with theoretical levels reaching approximately $10.7 billion, supported by new entrants, broker facilities and existing insurers increasing line sizes.
Additional capacity of $200–250 million is expected to enter upstream markets, reinforcing competition. Broker facilities continue to influence placements by enabling more selective deployment of capacity, contributing to lower pricing outcomes.
In downstream lines, capacity remains sufficient to complete placements without constraint. New managing general agents, Lloyd’s participants and spillover from adjacent property markets continue to add supply.
This environment has led to aggressive quoting behavior, with underwriters seeking to maintain participation and secure positions on placements despite declining margins.
Upstream markets continue to demonstrate a pattern where loss frequency exists but severity remains limited. Willis data shows $842 million in losses across 58 events, with the largest at $130 million.
Losses linked to construction activity and operators extra expense exposures are emerging gradually, but their impact has not been sufficient to alter pricing. Upstream portfolios have delivered results considered profitable relative to expectations, allowing the soft cycle to continue.
Premium levels, however, have declined to an estimated $1.5-1.8 billion, with only $900 million-$1.2 billion renewing, indicating pressure on available premium despite stable or increasing risk exposure.
Downstream markets continue to operate under conditions where loss activity has not translated into pricing correction. Competition remains high, driven by limited new risks entering the market and insurers competing for existing business.
While liquefied natural gas projects remain active, few new refineries are being developed, leading underwriters to compete for a relatively fixed pool of risks. This has resulted in aggressive pricing strategies and continued rate reductions despite loss experience.
Regional competition, including increased activity from Middle East-based markets, continues to add pressure to global pricing dynamics.
Liability markets show a similar trajectory. International liability remains broadly profitable, though concerns persist regarding litigation trends, reserving adequacy and claims inflation exceeding general inflation levels.
Additional capacity entering liability markets has contributed to downward pressure on rates. At the same time, casualty data indicates emerging pressure on profitability. Lloyd’s reported a combined ratio of 100.8% for casualty in 2025, moving the segment into marginal underwriting loss territory after a period of profitability.
In the US, casualty conditions differ by segment. Primary liability capacity remains stable, with general liability rates generally flat to low single-digit increases, while auto liability continues to experience higher claims severity and litigation-driven cost increases.
Despite these pressures, overall capacity remains sufficient, limiting the extent of pricing increases even in segments experiencing claims inflation.
Reinsurance markets continue to mirror primary market conditions. Excess of loss rates declined by 10–15% at January 2026 renewals, supported by surplus capacity and competition among reinsurers.
Quota share placements saw commission increases, supported by additional capacity and changes in cession strategies by buyers. Reinsurance costs declined in line with broader market trends, with similar outcomes expected for later renewals.
Energy sector consolidation is reducing the number of insured entities while increasing portfolio size and complexity. Fewer buyers with larger risk exposures are influencing competition among insurers seeking participation in major programs.
Deal activity remains characterized by lower volumes but higher values, with larger transactions concentrating risk across integrated value chains. This has implications for insurance program design and capacity deployment.
Carbon capture, utilization and storage (CCUS) is one of the limited areas generating new insurable risk. Projects are moving into later stages of development, introducing operational, contractual and long-term liability exposures across capture, transport and storage stages.
Project viability remains dependent on policy frameworks, carbon pricing and alignment of liabilities across the value chain. Long-tail risks, including potential CO₂ release and regulatory obligations, continue to influence insurer participation.
Geopolitical developments, including tensions in the Middle East, have increased focus on exposure levels and contributed to a more than 25% rise in oil prices. These factors affect business interruption valuations and supply chain considerations but have not yet resulted in a shift in pricing direction.
“Risk quality and strategic engagement matter more than ever. Clear risk data, flexible placement structures and strong broker-to-market relationships remain essential differentiators to create resilience and stability for energy companies in readiness to withstand unexpected shocks and future upturns in the market environment,” said Marie Reiter, global head of broking strategy, natural resources at Willis.
While conditions remain favorable for buyers, the combination of declining premium pools, sustained competition and rising loss activity suggests that any shift in capacity, reinsurance appetite or loss severity could alter current pricing dynamics.
