The global energy insurance market is experiencing a softening trend, fueled by intense competition and record-high capacity, according to the latest Energy Market Review from Willis. This shift is proving advantageous for energy companies in Asia as of the first quarter of 2025.
In the downstream sector, the trend of rate reductions is gaining momentum, driven by a relatively low loss record in 2024. However, early 2025 has already seen potential losses totaling $1.5 billion, exceeding the total for all of 2024. While current market conditions remain favorable, such a spike in losses could influence the pace and extent of the softening trend later in the year.
Energy companies focusing on rate optimization are in an advantageous position, benefiting from increased competition among insurers eager to secure high-quality accounts. Asian-based insurers continue to provide substantial capacity, with new and expanded offerings entering the market over the past two years, driven largely by improved profitability in the downstream sector. Additionally, insurers from other regional hubs, including the Middle East and London, are seeking greater exposure to Asian business, intensifying competition and prompting incumbent insurers to offer more competitive renewal terms.
In the upstream sector, market capacity has increased by approximately 5%, following a relatively calm year in terms of losses, contributing to the ongoing market softening. Underwriters are becoming more willing to take on leadership roles, which is further driving down pricing.
Despite historically poor performance in the construction segment, many insurers have already allocated their budgets for 2025 in this area, signaling a strong appetite for growth and market share.
Charlotte Watts, Head of Energy, Asia at Willis, highlighted that conditions in the upstream sector vary significantly due to the diverse nature of risks, which include operational, construction, subsea, and geothermal challenges. She cautioned that while the soft market is expected to persist, a series of large losses could quickly shift insurers’ risk appetite.
Watts emphasized that energy companies with strong relationships with insurers and effective risk management practices are likely to secure the most favorable terms. She also pointed out that 2025 will be a pivotal year for the energy transition, with companies needing to balance short-term fossil fuel investments with long-term decarbonization objectives.
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