A 25% increase in the oil price has encouraged an upturn in offshore exploration activity which is starting to impact positively on the offshore energy insurance sector. Similarly, the oil price rally has increased the value of “loss of production” insurance purchased.
However, Chair of IUMI’s Offshore Energy Committee, James McDonald, remains cautious: “Capex growth is mainly confined to the US shale market where insured values are considerably less than those achieved offshore. That said, we expect to see an increase in premiums associated with mobile offshore drilling rigs as they come out of lay-up. But day rates for floaters and jack-ups remain well below their earlier peaks due to continued over-supply.”
Loss activity offshore remains low. Hurricane Harvey bypassed the heavily populated Gulf of Mexico and large losses, in general, were minimal. A worrying trend for construction sector losses involving buoyancy devices seems to be developing, however. Attritional losses continued to track at a low rate due to reduced activity and improved health and safety practices. But this might reverse as rigs are reactivated.
Information on other offshore insurance markets, as well as supporting statistics, is available here.
