Specifically, IUMI’s analysis of global offshore energy premiums for 2019 showed a 1.4% reduction on the 2018 number down to US$3.35 billion. Although a lower number, the percentage reduction is more encouraging than the 3% reduction in 2018 and 5% in 2017.

The impact of coronavirus will not be known until next year, but global premiums are expected to reduce further which will cause an additional headache for underwriters.

Chair of IUMI’s Offshore Energy Committee, James McDonald, explained

The global premium base continues to shrink and is now at a level where one major loss could eclipse the entire annual income earned by the sector. This is a precarious and uncomfortable position to be in.

He added that as the world shifts towards a more sustainable future, society’s reliance on hydrocarbons – particularly oil – will continue to reduce. Within the OECD, around 50% of oil is used in cars and trucks and some commentators believe that electric alternatives might overtake conventional vehicles as early as 2026.

While this will impact part of the offshore energy sector, he is confident that in the long-term the drive for offshore renewable energy will replace lost business. Offshore renewables such as wind farms are already commonplace in the shallow waters off northern Europe and will soon move to deeper waters and wider geographies such as Japan, China and North America. Added to this, floating solar structures are now being produced and once the technology has been improved, we would expect wave and tidal projects to become more available.

He concluded that

Offshore renewables look set to become a sizeable strand of our overall portfolio in the future, but until then we are seeing a slight hardening of our sector as pressure to return to profitability is applied.