Published on 13 January 2026

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DOWNSTREAM ENERGY MARKET UPDATE H1 2026

Published on 13 January 2026

2026 downstream insurance market faces pressure from 2025's USD4-5 billion losses against USD3.5-3.75 billion premium pool. Despite major US and European incidents, oversupply and competitive dynamics support continued rate softening, with DIFC/MENA and Asia leading reductions exceeding London by 10%.

Recent years have seen what many reinsurers refer to as a 'rate correction,' with terms and conditions in 2024 largely considered sustainable for the long term. The abundance of available capacity and reinsurers desire to maintain, and even grow, premium volumes led to steady rate reductions throughout 2025, reaching their peak in the final quarter. Rate softening has been widespread, with reductions of up to 20% for well-engineered, loss-free risks with low natural catastrophe exposure.

However, significant loss events - most notably the PBF Martinez incident - have pushed total loss reserves above USD4 billion, with some estimates suggesting losses for 2025 could reach USD5 billion. This is set against an estimated global premium pool of USD3.5 - USD3.75 billion for the year. Major losses have predominantly affected US facilities, while Europe has seen notable incidents such as the Bayernoil Refinery fire in Germany (USD757 million) and the MOL Group Refinery incident in Hungary (USD450 million).

The significant rate reductions of 2025 have led to sparked debate around rate adequacy. While the market had previously undergone years of correction, reinsurers are now expected to resist further downward pressure on rates. Nevertheless, oversupply of capacity, competitive pressures, and the need to maintain premium income are likely to limit any significant slowdown in rate reductions. The soft market environment is expected to persist through the first quarter of 2026 and potentially beyond, subject to ongoing loss activity.

Favourable conditions have led to a rise in longer-term policy placements. However, these deals areEnhanced no claims bonuses and risk management credits remain prevalent, further influencing premium levels. Enhanced No Claims Bonuses and Risk Management Credits remain prevalent, further influencing premium levels.

Broker facilities, particularly in the midstream sector, are exerting additional pressure on open market placement shares, challenging reinsurers' premium income and competitiveness. While overall capacity remains robust, more reinsurers are stepping forward as lead markets, intensifying competition and fueling further rate softening.

Current conditions offer buyers the opportunity to secure broader coverage while benefiting from reduced premiums. Many reinsurers have relaxed policy conditions, allowing insureds to extend protections without increasing costs. However, retentions remain firm, and while this may be seen as a positive for reinsurers, the real value of property retention levels has diminished over time due to inflation.

• USA: Major losses, including those at PBF Martinez and Marathon Petroleum, have tempered the rate of softening compared to the London market.
• DIFC/MENA: The market has seen fewer losses, increased capacity, and minimal exposure to natural catastrophes. Rate reductions here have outpaced those in London and Europe by up to 10%. New entrants such as Starr and HCC have bolstered leadership capabilities in 2025, and additional players including Markel are anticipated in 2026. This development could see the MENA market become more autonomous, with all but the largest risks retained locally.
• Asia: As with DIFC/MENA the Asian market has not experienced any significant losses and rate reductions are generally in excess of those seen in London and Europe. Regional capacity remains stable; however, reinsurers have aggressive premium growth targets resulting in a highly competitive environment. It is widely expected the soft market conditions will continue during the first half of 2026.

As we enter 2026, the loss activity of the previous year is likely to influence a slowdown in rate softening. However, abundant capacity, ongoing pressure on premium income, increased local retentions, and greater reliance on facility placements mean that, after a predicted subdued start, the pace of rate reductions could accelerate through the first and second quarters of 2026. The trajectory will be shaped by treaty reinsurance renewals and any further loss activity, both of which could significantly impact market trends in the early part of the year.