liberty international underwriters presents: six trends affecting the energy market
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Learn from Liberty International Underwriters about key trends affecting the Energy market.TRANSCRIPT
Proprietary and Confidential
Six Trends Affecting the Energy Market
Robert Rokicki SVP, LIU Energy
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Introduction A Number of Recent Developments Affecting the Energy Market Have Significant Implications for Underwriting in This Segment
We’ll discuss six of the key developments, the implications, and how the insurance industry is addressing them
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6
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Differential Pricing the “New Norm”
How Are You Managing • Coverage extension limits & deductibles
• Policy wording (valuation / definitions / conditions)
• Renewal meetings “what do we accomplish?”
• Claims resolution/consensus likely to be more arduous and overall account administrative work
1
The above differentials should facilitate more attractive upfront deals, do they?
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Larger Events, More Often
Solutions • Actuarial reviews better defining category losses as: “frequency (attritional)”, “severity (shock)” and “natural catastrophe” to properly measure portfolio price adequacy
• Use supplemental risk engineering information to enable granular loss estimate analysis
2
Will premium pool be sufficient to address myriad of loss exposures?
Proprietary and Confidential More and Larger Natural Catastrophe Events Globally
Complications • Reliance on industry tools that
are inexact (at best) • Account-level modeling programs
better suited for portfolio controls
Solutions • Improve design and use of modeling • Clarify policy wording at inception to
avoid post-loss disputes. Examples: – What is the definition/deductible of “Flood Zone A”? – What is the definition/deductible of “Storm Surge”?
3
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Time Element Coverage and Volatility 4
• Commodity price volatility increasing in many segments
• Sizeable time element exposures with unique policy conditions: – Gross earnings, gross profits, margin caps,
adjustment provisions, CBI, extra expense
Solutions • Improve prediction of future
exposure for more accurate Business Interruption Values
• Adjust complex claims on an “Actual Loss Sustained” basis
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• Sustained energy investment and expansion • Debottlenecking of existing assets to efficiently handle shale oil/gas
• Energy independence
USA Shale Oil/Gas Development
Rising margins
Increasing revenues
Increased policy limits
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Aging Equipment & Tech Advances
Technology Advances • Higher temperatures • Higher pressures • Greater throughput
Aging Equipment • Maintenance • Capital expenditures / spares • Turn around time
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Proprietary and Confidential Conclusion Trends
Drivers include larger and more frequent events, greater price volatility, aging equipment, technology advances, and increasing revenues
The energy segment is complex and needs to be properly understood on an account and portfolio basis to enable long term, stable relationships (“trade with experts”)
Energy risk exposures overall continue to rise
Proprietary and Confidential Conclusion Underwriting Solutions
Improve modeling, clarify policy wording at inception
Improve prediction of future exposure, adjust complex claims on Actual Loss Sustained basis
More precise actuarial review, with more granular loss estimates
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LIU Energy & Construction Property Segments
OGPC
Petrochemical Chemical Refineries
Midstream Gas Pharmaceutical
Terminals Pipelines
Power
Fossil Fuel Simple &
Combined Cycle Hydroelectric Wind / Solar Geothermal
Water & Waste Water
Heavy Industries
Molten Metals Mining & Mineral
Processing Pulp & Paper
Construction
Erection All Risk (Energy & Mfg) Contractors
All Risk (Four Wall / Buildings)
Civil Infrastructure Works
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