2017 trading conditions may become the “new normal” in both the energy and insurance industries, warns Willis Towers Watson

ARLINGTON, Va., April 12, 2017 -- Willis Towers Watson (NASDAQ:WLTW), a leading global advisory, broking and solutions company, launched its Energy Market Review for 2017. According to the review, despite an encouraging uplift in the energy industry during the last 12 months, the sector is still beset by some significant challenges, e.g., low oil prices, cost-control pressures, workforce layoffs, onerous legislation and regulation, and the escalating risk of cyberattacks, which may reflect a new normal in the industry. At the same time, there may also be a new normal emerging in the global energy insurance markets. The abundance of reinsurance market capital, the driving dynamic behind market conditions now for nearly a decade, is likely to remain dedicated to the industry — no matter what individual sector loss records produce, the review adds.

Key insurance market findings from the review include:

• Capacity: Upstream market capacity is up from $7.56 billion to $7.72 billion, international downstream from $6.19 billion to $6.5 billion and international liabilities from $3.2 billion to $3.3 billion.
  
  
• Losses: Over $5 billion of upstream energy losses were recorded for 2015, the highest loss total for five years. Meanwhile, downstream energy losses for 2016 now stand at $2.58 billion, up significantly from 2015’s total of $1.91 billion.¹
  
  
• Premium income: From a high of £1.06 billion in 2014, in two years, Lloyd’s premium income from energy business has declined to just £700 million in 2016.
  
  
• Profitability: While individual energy portfolios have generally remained profitable during 2016, we believe that should the current loss record deteriorate by only a small degree during 2017, this might well be sufficient to threaten their viability. 
  
  
• Competition: Competition in all energy markets remains robust, fuelled by the broadening of leadership options in all lines of business. 
  
  
• Outlook: As of April 2017, markets are still softening, albeit at a decelerating pace, which may transition into a broader bottoming out of market conditions should individual portfolio loss records deteriorate further late in the year.

“The long-term outlook for energy insurance buyers remains uncertain,” said Neil Smith, global product lead, Natural Resources Lines, Willis Towers Watson. “History teaches us the market conditions in these lines of business can change rapidly, and should this prove to be the case, buyers will need to ensure they have the right strategy in place to ensure the continued viability of their risk transfer programs.”

About Willis Towers Watson

Willis Towers Watson (NASDAQ:WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas — the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com.

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1}Source: Willis Towers Watson

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