US Energy Casualty

The January 2024 Reinsurance Treaty renewals appear to have been completed without inflicting the pain on direct insurers that was anticipated by some, given the messaging from reinsurers in the build-up to renewal. We therefore expect the outlook through 2024 to stabilise with the rating environment plateauing and capacity, for the most part, remaining intact, albeit with the usual year-to-year capacity flux. For those layers that are perceived to be more than adequately rated, the competitive landscape may make moderate rate reductions available where insurers are eager to retain business. Outside of this we expect general rating pressure in the low to mid-single digit range as carriers aim to keep pace with inflationary pressures.

There are of course pockets of the market that remain challenging no more so than for Utilities, where wildfire capacity is being withdrawn by the energy mutuals, leading to buyers being forced to make significant alterations to the structure of their excess layers. Auto exposures continue to be in the spotlight, the London market continue to offer Alternative Risk Transfer/structured solutions excess of primaries to the larger more challenging fleets.

International Energy Casualty

The cost of claims in the Casualty insurance market is on the rise. Factors such as inflation, increased litigation, and higher medical costs are contributing to the increase in claims expenses.

• New market entrants are putting pressure on existing insurers who are trying to push rate increases in light of the increased claims costs. The increase in capacity has also seen the emergence of new lead markets putting additional pressure on pricing.
• Insurers are universally restricting coverage for both Climate Change and PFAS due to the building momentum behind litigation. PFAS (per- and polyfluoroalkyl substances) a group of widely used, ‘forever chemicals’ linked to human health issues has caused alarm within the Casualty sector, in certain quarters PFAS is being spoken of as a looming market exposure that could eclipse asbestos. Recent litigation and claims have primarily focused on the chemical and manufacturing sectors, but from an energy standpoint PFAS is a critical component within industrial firefighting foam with no viable alternative solutions currently available. Groundwater and watercourse contamination with PFAS following a fire is a major exposure focus for our Insureds given the predicament of recent exclusions and the absence of alternative foam.
• We are predicting a stable market in 2024 with insurers looking to push rate moderately, but ultimately we expect to see only minimal increases, if any. Where insurers have good loss experience, we may start to see reduced premiums.
  
  
  

Environmental Impairment Liability

The Environmental Liability Insurance market is experiencing several notable trends and developments.

• Increasing demand: There is a growing awareness and concern about environmental risks and liabilities among businesses and its stakeholders. This has led to an increased demand for Environmental Liability insurance coverage.
• Expanding coverage options: Insurers are offering a wider range of coverage options to address various environmental risks. This includes coverage for pollution liability, remediation costs, natural resource damages, legal defence expenses and image restoration costs.
• Stricter underwriting criteria: Insurers are implementing stricter underwriting criteria to assess the environmental risks associated with potential policyholders. They may require detailed risk assessments, environmental audits, and evidence of risk management practices.
• Reduced premiums: Premiums for Environmental Liability insurance in the London market have been decreasing due to an injection of new capacity and greater competition amongst carriers.
• Reduced premiums are somewhat contradictory to the rising costs of environmental remediation.
• Regulatory changes: Changes in environmental regulations and laws can impact the Environmental Liability insurance market. Insurers are closely monitoring regulatory developments to ensure their coverage remains compliant and adequately protects policyholders.
• Climate change considerations: Insurers are increasingly taking into account the potential impact of climate change on environmental liabilities. This includes assessing risks related to extreme weather events, sea-level rise, and changes in environmental conditions.
• Collaboration with risk management experts: Insurers are partnering with environmental consultants and risk management experts to better understand and assess environmental risks. This collaboration helps insurers develop more comprehensive coverage options and risk management solutions.