Energy Market Review Update 2025

Rate softening has further accelerated in most sectors of the energy market and shows no signs of abating. Insurance buyers remain in a strong position to optimize both cost and coverage as we move into 2026.

Insurers continue to battle between writing profitable portfolios and achieving the growth targets they have been set–a balance that is getting harder to strike. We may well see more insurer merger and acquisition activity going forward as markets try to inorganically grow their books.

A mixed year for losses

The upstream energy market has experienced another record year of low loss activity, potentially pointing at the establishment of a new baseline driven by improved risk management and asset quality. Downstream insurers, on the other hand, have suffered in the region of $3.5 billion of losses so far with claims already equaling market premium. While downstream leaders are addressing this loss activity on the most affected accounts and portions of their portfolio, market appetite for the remainder of placements grows further and rates continue to soften. There is still a little way to go before rates reach the absolute bottom of the cycle; we will know we are closer to this when markets start offering concessions on typical coverage restrictions and show a willingness to consider reduced retentions and waiting periods.

This raises questions around how much longer this softening cycle will persist before the market turns. Management will be keeping a watchful eye on the sustainability of reduced premiums as competitive pressures and growth targets potentially intensify in the year ahead.

The mismatch between narrative and reality

Brokers are often accused of portraying large reductions achieved on tendered placements under significant competition, as the new market norm. While extreme reductions are likely to be outliers, the market is moving in a direction: down. Although sizable reductions are not the norm across the entire portfolio of energy risks, it is incumbent upon brokers to push the market hard to achieve the best possible placement outcomes for our clients by creating appetite, competition and scarcity.

Similarly, it is underwriters’ responsibility to steady the tide of rate reductions to maintain profitability. To this end, ’underwriter talk’ frequently presents a picture of much lower average reductions across their book of business. However, these figures include outliers at the other end of the spectrum such as loss-bearing accounts and small placements with less favored risk profiles and, most importantly, they do not include new business which the insurer did not write in the previous year. It is the latter that often attracts the largest reductions. Without accounting for the full picture, average figures can be disproportionately low.

It is safe to say that the realistic picture for most clients lies somewhere in the middle of these opposing views. It’s the role of the broker to advocate for their client and reach a point at which all parties can agree and move forward with confidence.

Brokers are getting strategic to maximize client benefit

In the current market, brokers have a number of strategies they can deploy to optimize renewal terms for their clients:

• The ongoing oversupply in capacity and insurer appetite for growth is giving brokers additional leverage to align terms and conditions behind the most competitive quotes. This is resulting in fewer underwriter subjectivities and differences in terms and conditions as well as an overall simplification of previously complex verticalized placement structures. This simplification is yielding premium savings for clients over and above the pure rate reductions offered by the market
• Brokers are increasingly encouraging clients to weigh up the benefits of long-term relationships with their lead carriers against the potential cost savings that can be achieved if these leaders are challenged through alternative quotes. There are many considerations that play into deciding which option is right for each individual client, but the premium savings that can be achieved through challenging existing leaders are getting harder for insurance buyers to ignore
• The growth of broker fast-follow facilities is delivering clear client benefits including cost savings and faster completion of placements. As the capacity provided by these facilities displaces existing markets, competition for the remaining open market shares intensifies, spelling good news for buyers

Energy companies renewing for the remainder of 2025 are in a strong position in the softening market showing no signs of abating. Favorable reinsurance treaty renewals across all sectors of the energy market will allow insurers to further prolong the softening trend by alleviating some of the cost pressures. These savings could allow insurers to hold the fine balance of profitability versus growth ambitions for a little while longer, allowing buyers to reap the benefits of sustained compounding rate reductions into 2026.

We hope that you find the Review to be insightful and look forward to discussing any of these topics with you in more detail.