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Energy and Power Insurance in the USA

  • September 2015
  • -
  • Finaccord
  • -
  • 44 pages

Energy and Power Insurance in the UK is a report and market data file about the current and future outlook for the insurance of risks associated with the fast-evolving energy (oil and gas) and power sector in the USA.

In addition to showing how its value has changed since 2010, analysis of the US energy insurance market sub-divides it both by type of operation (i.e. upstream, midstream and downstream) and by type of risk (i.e. business interruption, construction, control of well / OEE, environmental liability, general liability, property and other) with these two splits then cross-tabulated against each other to identify the most valuable market segments. In addition, its value (split by type of operation) is forecast to 2018 and estimates for the market shares of energy insurance underwriters are provided, expressed as percentage ranges (e.g. 5.0% to 7.5%).

Market value data spanning 2010 to 2014 (with a forecast to 2018) is also provided for the US power insurance sector with segmentations in this case provided by power source at both a high level (i.e. conventional, renewable, other) and a detailed level (i.e. coal, gas, nuclear and oil in the conventional segment, and biomass, hydro, solar and wind in the renewable segment), as well as by type of risk (i.e. business interruption, construction, liability, property and other). Once again, these splits are cross-tabulated against each other and market shares for underwriters of power insurance are estimated as percentage ranges.

Over and above this unique market data, the study also examines the market drivers for both energy and power insurance in the USA (e.g. trends in oil and natural gas production and imports, trends in power generation segmented by source) plus the role played by captive and mutual underwriters (including the approximate percentage of the respective market values that they insure). In addition, it identifies the brokers with the most significant involvement in these two sectors, and considers how changes in the underlying energy and power sectors are likely to impact the associated insurance markets.

Table Of Contents

Energy and Power Insurance in the USA
TABLE OF CONTENTS
00 EXECUTIVE SUMMARY 1
10 INTRODUCTION 3
What is this report about and what is its rationale? 3
Several factors underpin the rationale for producing global research about energy and power insurance… 3
… including its worldwide value of more than USD 235 billion in 2014… 3
… and the growth of hydraulic fracturing (fracking), deepwater drilling, solar power and wind power 3
Methodology 3
Research program 3
Sources 3
Definitions 4
Energy (oil and gas) insurance 4
The energy insurance market segments between the upstream, midstream and downstream sectors… 4
… and by several types of cover, including one specific to upstream insurance 4
Power insurance 4
Power insurance covers the conventional, renewable and other power sectors 4
Premiums 4
Abbreviations 5
Finaccord 5
20 ENERGY (OIL AND GAS) INSURANCE 7
Energy (oil and gas) market and competitor background 7
Production, imports and associated infrastructure 7
Both oil and natural gas production have increased at healthy rates in the US in recent years 7
The number of onshore rigs has risen steadily while offshore rigs and platforms have declined 9
The upstream, midstream, and downstream sectors have all benefited from the growth of fracking… 10
… and substantial investment is occurring in new pipeline, rail and barge infrastructure 10
Competitive environment 11
There are hundreds of entities involved in upstream, midstream and downstream operations in the US 11
Energy (oil and gas) insurance market value, growth and segmentation 12
The US energy insurance market has been growing steadily in both nominal and real terms… 12
… with the proportion of the total market due to the upstream segment having risen… 12
… and with property and business interruption accounting for over 45% of the total 13
Types of cover bought vary significantly across the downstream, midstream and upstream segments 14
The value of premiums underwritten in the upstream segment has been impacted by a variety of factors 16
Onshore crude oil and liquids pipelines represent around 30% of total midstream premiums 16
Underwriter market shares 17
Upstream insurance 17
Travelers and AIG are the market-leading energy insurance underwriters in the upstream segment… 17
… in a market which may be fragmenting as a result of the entry of new competitors 17
Midstream and downstream insurance 19
Energi, Lloyd's of London and Zurich are the main rivals to the leading two underwriters 19
Broker market shares 21
The market for energy insurance broking in the US appears to be relatively concentrated 21
Future outlook 23
Oil and natural gas production 23
Energy (oil and gas) insurance 25
… albeit future growth in energy insurance depends in part on the direction of the price of oil 25

The midstream and downstream segments may decline regardless of the oil price scenario 25
Stricter regulatory conditions will impact offshore operations 25
30 POWER INSURANCE 28
Power market and competitor background 28
Power generation 28
Renewable power generation has been advancing quite rapidly, especially solar and wind power… 28
… although the US remains a country in which power derives mainly from conventional sources 28
There are three major electrical grid systems in the US 29
Renewable energy is projected to account for at least 15% of total gross electricity generation by 2020 30
Competitive environment 30
The US hosts a diverse electricity market with more than 2,000 market participants 30
Power insurance market value, growth and segmentation 31
Growth in renewable power insurance has helped to offset a real decline in conventional power insurance 31
Insurance for nuclear power risks accounts for about 124% of the total US power insurance sector… 33
… with (onshore) wind power insurance by far the largest segment within renewable power insurance 33
By type of risk, the total market value breaks down quite evenly across five categories of cover… 34
… with property insurance for conventional power risks the largest single segment 34
Conventional power insurance premiums have stagnated due to market over-capacity… 36
… in spite of not insubstantial business interruption and property damage claims 36
Underwriter market shares in power insurance 36
Conventional power insurance 36
ACE and Chubb combined would probably displace AIG from its position of market leadership 36
A small proportion of premiums are placed with captive and mutual insurers, such as EIM 37
Renewable power insurance 39
Specialist underwriter GCube is likely to be the market leader in renewable power insurance in the US 39
Key brokers 41
Future outlook 41
Power generation 41
Renewable power generation will continue to be the main driver of overall power generation in the US 41
Power insurance 43
The value of the US power insurance market is likely to fall back slightly in real terms up to 2018… 43
… due to continuing over-capacity and limited premium growth in conventional power insurance… 43
… and in spite of a more propitious outlook for renewable power insurance 43

LIST OF GRAPHICS / TABLES

00 EXECUTIVE SUMMARY 1
Key market data for energy (oil and gas) and power insurance in the US 2
10 INTRODUCTION 3
20 ENERGY (OIL AND GAS) INSURANCE 7
Oil production and imports in the US, 2010 to 2014 7
Natural gas production and imports in the US, 2010 to 2014 8
Oil and natural gas production (segmented between domestic consumption and exports) and imports in the US, 2010 to 2014 (table) 9
Underlying oil and natural gas production and import infrastructure in the US, 2010 to 2014 (table) 10
Energy (oil and gas) insurance premiums in the US segmented between upstream, midstream and downstream, 2010 and 2014 12
Energy (oil and gas) insurance premiums in the US segmented between upstream, midstream and downstream, 2010 and 2014 (table) 13
Energy (oil and gas) insurance premiums in the US segmented by type of risk, 2014 14
Energy (oil and gas) insurance premiums in the US cross-tabulated between upstream, midstream and downstream, and type of risk, 2014 15
Energy (oil and gas) insurance premiums in the US cross-tabulated between upstream, midstream and downstream, and type of risk, 2014 (table) 16
Estimated market shares of upstream energy (oil and gas) insurance underwriters in the US, 2014 18
Estimated market shares of upstream energy (oil and gas) insurance underwriters in the US, 2014 (table) 19
Estimated market shares of midstream and downstream energy (oil and gas) insurance underwriters in the US, 2014 20
Estimated market shares of midstream and downstream energy (oil and gas) insurance underwriters in the US, 2014 (table) 21
Estimated market shares of total energy (oil and gas) insurance brokers in the US, 2014 22
Estimated market shares of total energy (oil and gas) insurance brokers in the US, 2014 (table) 23
Oil and natural gas production in the US, 2018 (forecast) (low and high oil price scenarios) 24
Oil and natural gas production in the US, 2018 (forecast) (low and high oil price scenarios) (table) 24
Energy (oil and gas) insurance premiums in the US segmented between upstream, midstream and downstream, 2018 (forecast) (low and high oil price scenarios) 26
Energy (oil and gas) insurance premiums in the US segmented between upstream, midstream and downstream, 2018 (forecast) (low and high oil price scenarios) (table) 27
30 POWER INSURANCE 28
Power generation in the US segmented between conventional, renewable and other sources, 2010 to 2014 28
Power generation in the US segmented between conventional, renewable and other sources, 2014 (detailed breakdown) 29
Power generation in the US segmented between conventional, renewable and other sources, 2010 to 2014 (detailed breakdown) (table) 30
Power insurance premiums in the US segmented between conventional, renewable and other sources, 2010 and 2014 32
Power insurance premiums in the US segmented between conventional, renewable and other sources, 2010 and 2014 (table) 32
(table) 32
Power insurance premiums in the US segmented between conventional, renewable and other sources, 2014 (detailed breakdown) 33
Power insurance premiums in the US segmented by type of risk, 2014

Power insurance premiums in the US cross-tabulated between conventional, renewable and other sources and type of risk, 2014 35
Power insurance premiums in the US cross-tabulated between conventional, renewable and other sources and type of risk, 2014 (table) 35
Estimated market shares of conventional power insurance underwriters in the US, 2014 38
Estimated market shares of conventional power insurance underwriters in the US, 2014 (table) 39
Estimated market shares of renewable power insurance underwriters in the US, 2014 40
Estimated market shares of renewable power insurance underwriters in the US, 2014 (table) 41
Power generation in the US segmented between conventional, renewable and other sources, 2018 (forecast) 42
Power generation in the US segmented between conventional, renewable and other sources, 2018 (forecast) (table) 42
Power insurance premiums in the US segmented between conventional, renewable and other sources, 2018 (forecast) 44
Power insurance premiums in the US segmented between conventional, renewable and other sources, 2018 (forecast) (table) 44

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