The State of the Energy Insurance Market: Volatility and Solutions
The oil and gas insurance market, along with the broader energy sector, is currently experiencing significant volatility, particularly in Auto and Excess Liability. According to Thomas Blanquez, an experienced Energy brokerage team leader at Breckenridge Insurance (an Accretive company), this instability is largely driven by a surge in lawsuit activity, often backed by third-party litigation firms.
This aggressive pursuit of cases in high-activity areas like Texas and New Mexico results in higher verdicts and settlements, which in turn increases claim costs at a rate beyond general economic inflation, a phenomenon known as "social inflation." The financial impact of this is immense: for commercial auto liability alone, claim severity rose 78% from 2014 to 2023 (Source: Casualty Actuarial Society Increasing Inflation on Auto Liability Insurance – Impact as of Year-End 2023). This trend is directly connected to litigation, as the direct cost of Third-Party Litigation Funding (TPLF) to casualty insurers is forecasted to fall between $13 billion and $18 billion over the five-year period from 2024–2028 (Source: Carrier Management, 5-Year Cost of Litigation Funding to Commercial Insurers Could Top $25B, referencing EY analysis). While broad tort reform is the long-term solution, in the short term, partnering with a broker who deeply understands the energy space is the best way to protect your clients and your book of business.
Challenges and Market Trends
Despite market volatility, the US energy sector is demonstrating continued growth. The demands of AI data centers and manufacturing plants are driving a projected 2.3% electrical generation growth in 2025 and 3.0% in 2026 (Source: EIA Energy Sector Forecast Press Release Jan 25). Furthermore, US renewable energy utilization like solar and wind continue to grow at a projected rate of 12% in 2025 and 8% in 2026 (Source: EIA Short Term Energy Outlook Feb 25).
This rapid expansion intersects with the reality of the market:
- Capacity Shortage: The volatility has created a severe shortage of capacity for Energy casualty insurance, especially in the Auto and Excess Liability space. Carriers are lowering their limits or leaving the market entirely, forcing brokers to use multiple carriers to build the necessary capacity—a complex strategy Blanquez refers to as “excess Jenga"
- Renewable Exposure: Even the renewable energy insurance sector is not immune. While general liability exposures are unique for a wind or solar farm, these businesses are still subject to the same volatility in the auto market if they operate a fleet of vehicles.
- Know Your Client: The energy market is vast. Agents must know exactly what their client does to build a strong narrative for underwriters.
- Embrace Your Role as an Analyst: Underwriters may be quick to decline a submission if it does not paint a picture of a well-run business and is not detailed enough.
- Dissect the Account: Discuss the details of the account with a specialty broker who works with many energy accounts across carriers to identify potential coverage gaps early and strategize accordingly.
- Anticipate Loss Control Scrutiny: Provide insights on how your clients are managing their auto exposure through things like fleet telematics and driver safety programs or other loss control measures for their line of work.
- Communicate Early and Often: Bring in a specialized Energy insurance broker as early as possible, ideally 90 days before renewal. This allows time for initial assessment and likely additional questions which timely responses are vital to best position your account for success.
In total, following these recommendations allows time to create a collaborative and strategic plan for the market and gather all necessary information, which is crucial as underwriters are inundated with submissions. Long gone are the practices of mass-blasting submissions to many carriers.
What a Specialty Energy Broker Offers Agents
A dedicated energy brokerage team provides invaluable support to agents. The team at Breckenridge help agents navigate the market by:
- Providing Expertise: Specialists are available to present market conditions and insights at client meetings.
- Building Capacity: They expertly navigate carrier appetites to secure the necessary capacity for your clients, even when multiple carriers are needed.
- Ensuring Timeliness: They work with agents to create a game plan and get ahead of the renewal process, increasing the likelihood of a favorable outcome.
Energize Your Success
In an energy market where volatility and a "no fluff" approach are the new normal, partnering with an expert wholesale broker such as Breckenridge is no longer optional—it's critical for your success.
Gain access to our Energy Insurance Specialists by clicking the link below.
