Willis Comments on Energy Sector Insurance

November 2, 2004

International insurance broker, Willis Group Holdings, has issued a commentary on insurance related risks in the global energy sector, which notes, among other findings that, “Although there are many niche insurance markets for energy risks, the lion’s share of underwriting capacity resides in the commercial insurance marketplace.”

Willis defines this market as comprising two distinct types of risk: “single-site and aggregation. ‘Single-site risk’ virtually defines itself: value-at-risk at one location for a given insured. ‘Aggregation risk’ includes:
— Concentrations of exposures (people and/or physical assets), within a defined geographical area, that may be subject to such ‘nat cat’ perils as flood, wind or earthquake, or to an act of terrorism.
— Accumulation over time of liability arising from specific perils, products or operations.”

The bulletin notes: “Cost, availability and terms of risk transfer for energy risks, as well as the long-term future of the marketplace, depend upon the behavior of these types of risk. To better understand the forces at work, we need to take a brief historical perspective.”

The study examines that perspective, the anatomy of the cycles involved and the changes, challenges and future perspective of the sector.

The full report may be obtained on the company’s Web site at: www.willis.com.

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