Willis Review Reveals That Superheated Commodity Prices are Causing Apprehension in the Energy Insurance Market
London, UK, January 17, 2008 – Sharp increases in the price of oil, steel, building materials and contractor day rates have resulted in significantly increased exposures to energy insurers. Despite loss levels in the energy insurance sector remaining low for a second successive year, there is now real apprehension in the market as rating levels continue to soften significantly. This is the key finding of the latest Energy Market Review from Willis Group Holdings (NYSE: WSH), the global insurance broker.
The Willis Energy Market Review revealed that the “superheated” commodity prices have resulted in increased replacement cost valuations and have provided extra scope for longer and costlier delays in the event of an accident. The potential for more severe losses in the energy industry has therefore been enhanced, at a time when many asset values remain unrevised for insurance purposes, says Willis.
Phillip Ellis, Chairman of Willis Energy, believes that this is a dangerous situation as more expensive losses are bound to arise at some stage in the future. “While some companies are operating their assets in ways that are far superior to the past, for others the run of good luck is just that. It is very hard for us to accept that this run of low loss activity will continue indefinitely. Ultimately, something will break.”
Mr. Ellis encouraged clients to continue to re-examine their risk exposures and asset valuations, in order to ensure that they remain in a position to be properly indemnified by insurers in the event of more severe losses in the future. He also urged brokers and underwriters to “innovate and improve our offerings to such an extent that our clients’ appetite for them continues to grow.”
The comprehensive Willis review also examines developments in energy-related sectors and issues including: Reinsurance, Upstream, Downstream, OIL membership, Construction, International Liabilities, US Excess Liabilities, Terrorism and Directors and Officers Liability.
Willis Group Holdings Limited is a leading global insurance broker, developing and delivering professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 300 offices in some 100 countries, with a global team of approximately 16,000 Associates serving clients in some 190 countries. Additional information on Willis may be found at www.willis.com.