The Wall Street Journal noted on August 24th, that more energy companies are uninsured or underinsured as prices for coverage rise and as  infrastructure improves .

http://www.foxbusiness.com/story/markets/industries/energy/energy-companies-slash-insurance-levels-wsj/The focus of the article was primarily on offshore companies and their windstorm coverage decisions this year.

Brokers seemed to think these decisions are due to stiff rate increases while the energy companies attributed the changes to improved technology and more regulation reducing the likelihood of damage.

Particular approaches ranged from total wind self insurance to dropping cover on less valuable structures.

While we certainly have seen significant increases in offshore wind pricing post  Ivan, the risk transfer decisions made by these companies at this point are not just a factor of insurance product availability and pricing.  The 08-09 crash of prices and growth in inventories and its impact on company bottomlines in many cases threatened even company survival.   Those in the offshore world with the most stable contracts and utilization levels have weathered things well thus far thanks to the rebound that is occurring. By nature offshore exploration is more of a commitment in time and less vulnerable to the impacts felt in the land rig world.

In this context that companies are choosing to take on risk is not surprising. Tragically some of them may find themselves in a catastrophic loss at some point  for which they are totally unprepared.

Others may opt to go into captives or make some other arrangements as an alternative to traditional insurance products.

In many ways it is a tough loss for those of us who like to work with this industry to provide appropriate solutions.  But this takes  little creativity and unfortunately it’s not consistently present in the staid insurance industry.

We believe we can help with that.