The offshore energy insurance sector has been urged to look to the future and embrace the opportunities a move to renewable energy will deliver.
Speaking at the IUMI (International Union of Marine Insurance) annual conference being held virtually from Seoul, chairperson of the Offshore Energy Committee, Frank Streidl said the offshore sector had some key decisions to make for the future.
“The economy as well as society will always require energy and traditional sources are giving way to more sustainable fuels,” explained Streidl. “Our reliance on oil and gas is transitioning to renewables such as wind and solar power. Longer term, we’ll see hydrogen as well as carbon capture and storage processes and facilities starting to dominate. Underwriters need to recognise this change and be much more proactive in working with energy companies to deliver new and innovative insurance products.”
The accelerated transition to greener energy will, according to Streidl, be driven by a mix of political imperatives, technological progress and business initiatives. If energy underwriters embrace the move as an opportunity and not a threat, then a continuation of the success of the offshore energy insurance sector looks set for the long-term.
He added: “Underwriters must start working hand-in-hand with energy companies as partners in this inevitable transition. We need to develop new insurance products that cover the transition without any gaps. Our role is to be both reliable and transparent in this process.”
Although Streidl said he recognised that income derived from the offshore oil industry is paying for development in greener fuels, he viewed them as separate entities. There will continue to be a need to produce oil and insure conventional offshore energy assets but, increasingly, to cover the risks associated with new sources as well, he told delegates. Oil and gas accounts for more than 90% of premium in the offshore energy market but Streidl said he saw that percentage continuing to decrease, albeit slowly, over the coming years.
It came as IUMI reported a global offshore energy premium base for 2020 of $3.6 billion. Although a slight increase on 2019. IUMI warned premiums have been languishing at low levels for the past six years or more. A continuing low claims environment has offset, in part, the low premium base but profitability has been limited.
“The upstream energy insurance market is in hibernation”, said Streidl. “We need to turn it around to our favour. There is a major opportunity for energy underwriters to create a new and exciting business portfolio and to be a facilitator – and not an obstructor – in the global move to a greener society”.