Yemisi Izuora
Insurers Companies are currently jostling for underwriting projects outside Middle East with premiums for upstream energy insurance outside the region tumbling by about 25 per cent year to date, insurance brokers told the Financial Times.
In some cases, some insurers have slashed the premiums by as much as 50 per cent, even at a short-term loss, according to industry insiders who spoke to FT.
The reason is clear-as oil and gas companies boost exposure to basins and projects outside the Middle East, insurers are competing for a market share of the now-shrunk global pool of upstream developments that are not in an active war zone.
“Upstream [energy] has been a very profitable sector for the market for a number of years,” Rupert Mackenzie, a natural resources insurance broker at WTW, told FT.
“The view from insurers is, this is a sector which they would like to have ongoing exposure,” the broker added.
Mackenzie’s colleagues at WTW said in an April report. Energy Market Review 2026, that “ratings are ‘through the floor'”.
This year, “15-20% reductions are available for core upstream risks with clean loss histories and substantial premium on the slip, with 40%+ reductions still observed in exceptional cases,” WTW said in its annual report published a month and a half after the Iran war began.
“The overarching pricing trend is unmistakable: even after a decade of softening, the market is still finding new downward territory,” according to WTW.
The Iran war and the Middle East becoming an active war zone have pushed the world’s biggest international oil and gas firms to pursue upstream projects away from the region, Mackenzie told FT.
Global insurers had just shaken off the ESG push from earlier this decade when the Middle East conflict upended oil and gas upstream project coverage.
The world’s lowest-cost oil and gas producing region became a war zone at the end of February, with war-risk premiums and oil and gas drilling and construction projects facing either delays or significant cost inflation.
Five months of uncertainties about new oil and gas projects in the Middle East have prompted insurance giants to turn to underwriting drilling and project construction ventures outside the prolific but highly volatile region.
And the race is on for attracting insurance business in oil and gas basins less exposed to geopolitical flare-ups. Insurers are slashing premiums on upstream energy insurance for projects not depending on the on-and-off closed Strait of Hormuz and other chokepoints in the Middle East.