What energy reinsurance covers

Energy reinsurance supports insurers that write the oil, gas, power and renewable energy industries. These risks combine very high values at single locations, complex engineering and exposure to natural catastrophes, so primary insurers rarely keep more than a fraction of each risk. The market is usually divided into segments:

  • Upstream: offshore platforms, drilling rigs, subsea equipment, control of well (blowout) and removal of wreck.
  • Midstream: pipelines, storage terminals, LNG liquefaction and regasification.
  • Downstream: refineries, petrochemical and chemical plants.
  • Power and renewables: thermal plants, hydro, solar farms, onshore and offshore wind, battery storage.
  • Energy liabilities: third-party liability and pollution arising from operations.

How energy risks are reinsured

Large energy policies are usually shared among many insurers on a subscription basis, and each participant then protects its share with reinsurance. Common tools are facultative placements for the largest sites, energy per risk excess of loss, catastrophe excess of loss for windstorm and earthquake, and whole-account specialty treaties combining energy with marine and aviation.

Windstorm and catastrophe exposure

Offshore energy in the US Gulf of Mexico showed its catastrophe potential when hurricanes Katrina and Rita in 2005 and Ike in 2008 damaged many platforms and pipelines. Since then insurers and reinsurers have applied named-windstorm sublimits, aggregate limits and stricter modeling for the region. Similar attention applies to typhoon exposure in Asia and to earthquake exposure at refineries and LNG plants.

Pricing drivers

  • Estimated maximum loss (EML) from engineering surveys
  • Age, maintenance and process safety of the facility
  • Business interruption values and indemnity periods
  • Location, catastrophe exposure and accumulation with other sites
  • Loss history of the operator and the wider sector

The international market

Lloyd's and the London company market are the traditional lead markets for upstream and downstream energy. Bermuda is home to large specialty carriers and to Oil Insurance Limited, an energy-industry mutual. In the US, Houston is a center for energy underwriting, while European reinsurers and nuclear pools support power generation. In Asia and the Middle East, national oil companies' captives and regional insurers cede much of their energy exposure to international reinsurers through Singapore, Dubai and London.

The energy transition

Renewables are now a major growth area. Offshore wind farms, large solar projects and battery storage bring new technology risks, such as serial defects, cable damage and fire, and limited loss history. Reinsurers look for proven technology, warranty protection from manufacturers and strong construction and operational controls. Construction phases are usually covered under construction all-risks policies, and operational phases under property and business interruption covers.

How Polis Re can help

We help energy insurers and captives prepare submissions with engineering and exposure data and connect them with licensed reinsurance intermediaries and authorized reinsurers. For primary cover see energy insurance, or request reinsurance support.