Whitecap Europe’s Energy & Property Market Overview – April 2025

A Year of Transition in Energy Markets

The energy sector in 2024 demonstrated remarkable price stability, a notable contrast to the geopolitical uncertainties and concerns over Chinese economic slowdown that had threatened to disrupt supply and demand dynamics. Within the insurance landscape, Oil and Gas markets largely experienced a softening trend. This shift was influenced by a below-average loss year, increased capacity from both new and established insurers, and more favourable treaty conditions.

Energy Market Overview

2024 proved to be a profitable period for insurers, reflecting overall benign loss activity. However, the market began exhibiting softening characteristics in the fourth quarter, a trend that accelerated into year-end. Well-managed accounts saw reductions of 10% to 20%, driven by increased capacity from existing insurers and the emergence of new and existing MGA’s. The degree of softening varied based on factors such as loss record, robust engineering of risks, and Nat Cat exposure, alongside stable treaty renewals. The latter part of 2024 revealed a clear oversupply of capacity, with insurers actively competing to maintain their positions, even with premium reductions of 10% to 15%. Certain regions experienced even more pronounced reductions, largely due to local cedants utilizing treaties more aggressively to retain premium income.

Upstream Energy: A Buyer’s Market

The Upstream market is poised to favour buyers as the supply-demand balance continues to shift. Excess capacity and benign loss activity are contributing to this trend, with further market softening anticipated. Brokers are navigating a complex environment with access to over 140 markets, creating both opportunities and challenges in renewals and marketing. Specific sub-sectors, such as GOM wind and offshore subsea CAR, are experiencing a more gradual softening of rates. Risks in regions with strong domestic insurers are likely to face increased downward pressure on rates. Brokers face the challenge of balancing client savings with maintaining strong relationships across the value chain, as numerous underwriters compete for the same premium.

Midstream Energy: Shifting Dynamics

The Midstream market reached a turning point in 2024, transitioning from hardening to softening conditions by the close of the year. Rate reductions ranged from approximately 2.5% to 10%. Underwriters, driven by profitable performance and excess capacity in the Upstream sector, sought premium opportunities in the Midstream segment. This influx of new capacity exerted downward pressure on Midstream rates. Favourable loss experience in recent years, including the decline in Canadian wildfire loss reserves and the receding impact of significant 2022 losses, has further contributed to this trend. As Upstream underwriters maintain their focus on Midstream business, brokers will navigate an increasingly competitive market and the corresponding softening rating cycle.

Downstream Energy: Profitability and Growing Competition

The Downstream market experienced anticipated softening in 2024, despite some ongoing loss development from 2023. This softening trend was supported by benign loss activity, with low operational and natural catastrophe losses enhancing underwriter profitability. Although the natural catastrophe season was active, insurable losses did not significantly impact the Downstream market. With annual global premiums projected at USD 4.25 million, 2024 was shaping up to be one of the most profitable years on record. While market capacity remained stable in 2024, indications suggest an increase in 2025, which will likely intensify competition and further pressure rates downward. Insurers, in their efforts to sustain market share and premium income, are showing a strong interest in high-quality accounts. This dynamic allows brokers to potentially negotiate improved terms and conditions for their clients.

Key Areas of Focus:

• ESG: The market continues to seek consensus on ESG factors. The stance of major European markets warrants close attention, as it could influence future market capacity, particularly in specific Downstream sub-sectors.
• Business Interruption: Business Interruption coverage remains a focal point, with the introduction of the LMA 5515A Clause (incorporating a Partial Loss Adjustment Factor) representing an insurer initiative to mitigate claim amount uncertainty.
• Valuations: Insurers are emphasizing the importance of recent revaluation exercises to ensure accurate asset valuation, especially in the context of post-Covid inflationary pressures. Clients who have engaged valuation companies have been viewed favourably by the market, while those without recent valuations may face rating loads due to perceived under-insurance.
• Wildfires: Wildfire risk is gaining prominence in certain regions, with insurers increasingly requiring updates on vegetation management and firefighting capabilities.
• Underwriting Discipline: Underwriters are prioritizing underwriting discipline and risk selection to enhance profitability and manage volatility. This involves rigorous risk assessment and portfolio diversification, though some underwriters continue to compete aggressively on price.

Whitecap Europe Overview

Whitecap Europe continues to achieve growth in its global energy portfolio, despite intense market competition. Our client retention remains strong, though occasional business loss is inevitable, often driven by changes in reinsurer appetite. While 2025 is anticipated to be a challenging year, we are confident in our ability to achieve our objectives and deliver another profitable year, in collaboration with our valued broker partners and clients.

Property Market: Strong Performance and Strategic Focus

Whitecap experienced a highly profitable year in 2024, marked by the acquisition of a significant number of new property accounts. Despite the influx of new MGA capacity, we have maintained a well-diversified portfolio on a global scale.

Underwriting Philosophy and Methodology

Whitecap adheres to a philosophy of strict underwriting discipline. Our risk pricing is supported by internal tools, and every risk is assessed using the Swiss Re CatNet Tool to rigorously evaluate Nat Cat exposures. Our underwriters’ in-depth knowledge of accounts is fundamental to ensuring appropriate pricing for the exposures we assume.

Reinsurance and Retrocession Strategy

Whitecap currently operates with a 70/30 ratio between Reinsurance and Retrocession accounts. In 2024, we expanded our cedant base to include South Korea, Pakistan, the United Arab Emirates, India, and Japan.

Global Reach

Whitecap’s property business has a worldwide scope. Our current portfolio is concentrated in Asia, the Middle East, Africa, and Europe. We are actively pursuing growth opportunities in Latin America, the USA, and Australia. However, regulatory frameworks in some of these regions may present limitations on certain accounts.

Occupancy Focus

Whitecap’s primary focus is on heavy industries, including power plants, petrochemicals, steel, fertilizers, chemicals, and mining, representing approximately 80% of our book. Our portfolio also includes occupancies such as semiconductors, real estate, banks, electronics manufacturing, and motor (plants/showrooms).

Looking Ahead

We anticipate a challenging market environment in 2025, given the increased presence of new MGA’s. However, we are confident in our ability to achieve our targets through strong business relationships and efficient turnaround times. Our strategic objectives include developing relationships with new cedants and expanding our business in Europe, Latin and Central America, and the United States.