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We also work in areas as diverse as trade credit, surety, political risk, and environmental risk transfer. And if you have employee benefit issues or need KEYMAN LIFE we would also be pleased to guide you in finding solutions.

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Energy Industry 2010 and impact on Insurance Markets

Ernst and Young noted this week that oil and gas industry fundamentals are improving with developing countries continuing to outpace the advanced countries in terms of growth, with positive, if vulnerable, indicators globally. With generally rising economic expectations, energy market sentiment remains relatively positive.

Analysts at Ernst went on to say that oil prices are anticipated to grow with increased demand as the economy continues to recover.  The challenge may be higher prices negatively affecting economic development.  While natural gas long term prospects for pricing and demand are strong, current prices and demand remain generally weak on continued production growth largely from unconventional gas plays.  Not surprisingly, oilfield service company bottom lines have benefited from the strong uptick in drilling assets and the growth in unconventional gas and associated boom in horizontal drilling.   Meanwhile refining margins have finally showed some strengthening though capacity remains shut in at pre 2008 levels.   Deal flow is up and deal size is growing on loosening capital markets and consolidation in oilfield services.

And in the insurance world, a quiet hurricane season and significant new capacity both upstream and downstream is stabilizing and in some cases softening pricing.  Absent more events such as the tragic loss and developing environmental problem accompanying the fire and total loss of TransOcean’s Deepwater Horizon this week, the challenge for energy accounts is to differentiate themselves within this market to take advantage of the opportunities.  But conversely with increasing capacity, insurers are feeling the pressure to differentiate as well to show their market leadership.  What is still unclear early in this process is how far this trend will go to impact retentions and other terms and conditions.  No significant changes are expected in terms and conditions but pressure could be applied on retentions in an effort to pressure competitors in an environment of improved capacity over the past 18 months.

If you have questions about the impact on your business, let us know.

Meridian is a highly dynamic specialized insurance consulting group and broker with offices in Boston, MA, Newport, RI and Brookfield, CT. We specialize in risk management and risk transfer for traditional and alternative energy companies. We are members of the International Energy Credit Association and the Connecticut Maritime Association. Our Mission is simple.  We seek to help our clients make the best risk and risk transfer decisions possible.


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