1 / 14

Energy Market Update

Energy Market Update. Quarter 2, 2011. What is affecting our clients – Global economy. Global economic downturn then recession, slow recovery Oil price fluctuation - US$35 to US$147 Raw material price fluctuation (activity in India and China driving prices up), commodity markets up

glenda
Télécharger la présentation

Energy Market Update

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Energy Market Update Quarter 2, 2011

  2. What is affecting our clients – Global economy • Global economic downturn then recession, slow recovery • Oil price fluctuation - US$35 to US$147 • Raw material price fluctuation (activity in India and China driving prices up), commodity markets up • Funding for projects difficult to obtain, lending activity is still low • Exchange rates (EUR / USD) • Supply and demand for insurance product Aon Risk Solutions | EnergyProprietary & Confidential

  3. What is effecting our clients – capital costs Made up of what ? Aon Risk Solutions | EnergyProprietary & Confidential

  4. What is affecting our clients? – material costs 2007 – 2011 2003 - 2007 • Structural steel -3.8% +60% • Pressure vessels & h/exchangers -4.7% +40% • Compressors, pumps & valves +6.3% +30% • Pipe material +5.4% +100% • Control systems +1.1% +10% • Electrical Systems +6.0% +40% Aon Risk Solutions | EnergyProprietary & Confidential

  5. What is effecting our clients? – delivery times Why is this important ? Aon Risk Solutions | EnergyProprietary & Confidential

  6. 2009-2010 Background - Onshore Energy • Benign years for underwriters with low claims activity (despite Haiti Earthquake which had limited impact on Energy assets/insurance) • Softening market (reductions of 10% to 15%) but continued underwriter profitability. • Swiss Re Group 2010 net income US$863m • Munich Re 2010 net profit Eur2.4bn • Underwriters benefited from strong results from non-underwriting income streams such as improved investment income from the strengthening financial market. Aon Risk Solutions | EnergyProprietary & Confidential

  7. 2011 Significant Natural Catastrophe • Jan - US winter storms including tornado touchdowns and power outages. Estimates of US$1bn in damages. • Jan - Australian floods, an area larger than Great Britain and Ireland flooded in Brisbane alone. Australian Prime Minister Julia Gillard “AU$5.6bn in reconstruction costs”. Significant mining losses also reported. • Feb - 6.3 magnitude earthquake in Christchurch, New Zealand. Very shallow depth of 5 kilometres which struck at a distance of 10 kilometres from the city centre. New Zealand Prime Minister John Key, “we may be witnessing New Zealand’s darkest day”. Main impact on commercial property insurance. • Mar - Japan earthquake magnitude 9 which triggered a large tsunami the fourth strongest earthquake recorded since 1900. Aon Risk Solutions | EnergyProprietary & Confidential

  8. Downstream market capacıtıes and ratıng • 2010 Rates were declining and capacity up • 2011 Impact of Australian Floods and Canadian Tar Sands Loss? Japan Earthquake etc World Trade Center Financial Crisis Andrew Katrina/Rita North Ridge 6000 120 5000 100 4000 80 3000 60 2000 40 1000 20 0 0 11 YTD 93 94 95 96 97 98 99 0 01 02 03 04 05 06 07 08 09 10 Offshore Capacities Onshore Capacities Percentage of 1992 rates Aon Risk Solutions | EnergyProprietary & Confidential

  9. The Downstream Energy Market Aon Risk Solutions | EnergyProprietary & Confidential Then Q1 2011;Canadian Oil Sands, USD 1.000.000.000.Dow Chemicals (USA), USD 150.000.000.Escom (South Africa) USD 150.000.000.Brazilian Petrochemical USD 110.000.000.Vale ( Mining ) USD 750.000.000.Anglo American( Mining ) USD 400.000.000. USD 2.560.000.000. Japan little effect on “energy” but contingent business interruption is problem. Consequently, after many good years, 2011 does not look so good. Underwriters reducing lines on Natural Catastrophe

  10. The Fallout • Chartis announces US$1bn loss in quarter one after Japan and other catastrophic events. (Security downgraded) • Munich Re announces Eur1.5bn loss for the Japanese quake. • Industry braced for US$10bn insured loss in Japan net of Government cover with no estimate for reinsurance losses at this stage. • New RMS model released • Significant changes to the way accumulations are analysed by underwriters. • Speculation that underwriters may have greater accumulations than previously thought. • This may lead to reductions in natural catastrophe lines by underwriters or required them to buy increased reinsurance protection. • This could ultimately lead to increased rates on natural catastrophe exposed accounts. Aon Risk Solutions | EnergyProprietary & Confidential

  11. What about supply ? Aon Risk Solutions | EnergyProprietary & Confidential

  12. Onshore Capacity Changes – Key Markets Aon Risk Solutions | EnergyProprietary & Confidential

  13. What does this mean for the Energy Insurance Market in Q3/Q4 2011 ? • Oil prices still above US$100 per barrel • More confidence in investment • Economics • Interest rates still at historical lows • Lending conditions still tough • Demand • Increasing, ever bigger projects • Increased Business Interruption numbers leading to higher limits Aon Risk Solutions | EnergyProprietary & Confidential

  14. What does this mean for the Energy Insurance Market in Q3/Q4 2011 ? • Supply • Capacity is stable for small limit Non Natural Catastrophe • For Natural Catastrophe/poor loss record capacity is being squeezed • Rating Agencies • RMS 11 to become the normal model • Downgrades have happened as well as the odd upgrade • Consumer protection • Solvency II, capital ratios. Aon Risk Solutions | EnergyProprietary & Confidential

More Related