Energy Market Monitor

8/3/2019 Energy Market Monitor

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2 Energ Maret Monitor - Issue 3, 2011

UpstreamNnety percent hre enery

ne h nw een renewe r 2011.

The mrket nw wtn r tw thn.

rty the renew nerwrter renrnce

prrmme whch hppen t yer en. arey the

reinsurance jamborees at Monte Carlo, Paris and BadenBaden are underwa. The CEO of Munich Re said in one

reth there w e ncree n n the next reth

there w e n rectn. i tht t? We eeve tht

enery rte w hry re t , mch nerwrter

w ke th nt t e the ce, they re cnvnce

tht ther renrnce w eectvey e pyn re,

ether y ncree ct r retentn. r exmpe, mt

underwriters are paing a rate of approimatel 35% for

ther rt enery yer n renttement premm tht

usuall 100%. So, in the event of a loss to the laer, it

ecme mt necnmc t cntne t y thyer the prce re y mre thn ew percent. Wht

w hppen tht enery nerwrter w e expecte t

retn mre, .e. ph p ther retentn. in thery th

men tht nerwrter w nee t chre mre t py

r the hher retentn. in prctce wht nvry

hppen tht nerwrter wrte mre ne t

enerte ncme, th cretn cmpettn, whch e

t rectn. it w e nteretn t ee whch wy the

mrket jmp. it etmte tht eventy ve percent

the Maret renew their programmes at ear end so this will

certny e crc nctr the qrter ne tren.

secny, there nw n expecttn tht ther w e n

Gulf of Meico windstorm losses between now and the end

the hrrcne en. There hnt een mjr

wntrm n the g ter octer tht h ecte the

hre mrket. Hrrcne hppen nt the me

Nvemer n there wy rt tme! r the

wrtn wntrm rk nther qet en w ye

ret r the wh tye n th c.

Premm hve nt rece th yer, there were n new

pyer n the mrket n nerwrter nt nee t

ncree ther cpcty; n prev yer menerwrter h ht expenve renrnce

prrmme tht were nt ecnmcy n. it very

mch ncn ct r nerwrter t cntne t wrte

the c, py e, py r retentn n mke prt.

Th yer, t, w hve een mper yer. a

windstorm will hit the Gulf of Meico offshore platforms

n, t jt mtter when. When t e hppen

nerwrter w hpe tht ther me re reent n

cme t wth the rht

nwer, methn tht

they hve nt cceee

n the pt.

The Maes FPSO loss is

n exce us$850

mn n mt

the cm w e he

y the renrnce

mrket. Tm bt, the

ly rnche

drectr, h nce n

erte the hre

enery mrket r ntchrn enh mney

t the rety tht

n there ve

renrnce mrket

ve, ly nerwrter w cntne t e t t

ther vnte n they py cn.

Pernne chne n the hre mrket re w.

P dwn h et bezey t trt p n hre

capabilit with Hard. He has been succeeded b Mathew

Holmes who previousl wored at Catlin. Brian Randall haset Wtkn t wrk r brt. bth P dwn n brn

Randall will have a following and the will create a little

mre cpcty n the mrket. J aer h et anz

n ne t Chcer.


3/12

Marsh 3

Oil Updateoil h nce n ene wth t

memerhp t cner nment

chne t the oil me. at the spec

General Meeting (SGM) on 13th Septemberthe br oil pt three key retn t

the memerhp n were pprve.

Resolution 1 Limit Modications:

(a) To increase the maimum per occurrence limit for 2012

(from US$250 million) to US$300 million (other than for

dNW whch remn t us150 mn prt us$250

million)

(b) To split the aggregation limit between:

(i) Eight Sectors increase (from US$750 million) to

us$900 mn

(ii) DNW unchanged at US$750 million

Nte: dNW = dente Nme Wntrm. Th crrenty

means Atlantic Named Windstorm (ANWS) but could includean future windstorm areas (if triggered b losses).

The ver perceptn tht th evepment mt e

vewe ptve y the memerhp. The oil mt t

us$250 mn w perceve e ve t memer

than it once was and whilst it ma prove to be of neutral benet

to pure downstream members (who can obtain sucient

cpcty n the cmmerc mrket whch pprt ther bi

purchase), it is liel to prove etremel positive for upstream

memer. Th prtcry r the wth E&P et

(US$300 million for interest OEE limits ecess of US$10 millionfor 100% interest) or midstream pipeline assets (pollution

coverage). It is liel to prove to be a competitive alternative to

the cmmerc mrket.

Resolution 2 Collateral for Contingent Liabilities:

T w the oil br t mpe cter reqrement n

an member for its contingent liabilities (future premium

obligations) in the event that its Pool % eceeds 30% (of an

Pool).

it r nertnn tht the r w cncerne tht, n

the event evere wntrm e, oil c hve

signicant credit eposures to individual members arising

rm ther wntrm p prtcptn thee re

prprtntey hh. Th prtcry tre r the

hre wntrm p. Th retn therere key t

prve t e ptve r the mjrty memerhp tht e

nt hve wntrm expre t prtect the vency the

mt y mttn cret cncern.

Resolution 3 Windstorm Pool Quota Share Element:

T w the br t et qt hre percente r nyven yer y whch the Exce Wntrm P w qt

share the US$300 million windstorm annual aggregate

retentn wth the eht sectr.

it w pper tht th ene t rn nce etween

the Exce Wntrm P n the eht sectr P wth

repect t wntrm e. The prpe en t v the

ttn where memer wth prprtntey hh

windstorm eposure (large share of the Ecess Windstorm

Pools) is onl responsible for a much smaller share of

windstorm losses incurred (governed b their lower eight

Sector pool share) if such losses do not penetrate into the

Exce Wntrm P.

The br w et the qt hre percente ech yer. r

2012 it will be zero %. It will not eceed 25%. This development

w ee crrent Exce Wntrm P prtcpnt trt t

pa windstorm claims within the US$300 million windstorm

nn rete retentn prty e n ther hher Exce

P hre rther thn jt ther wer eht sectr hre. it

therere key t e een ptve r memer wtht

re wntrm expre t rn mre eqty t the

p.

Tkn the ve nt cnertn, t w pper tht

oil eekn t cntny pt t the reqrement t

members and the new (increased) limits will have a bearing on

the nterctn etween oil n t cmmerc mrket

cmpettn.


4/12


dOwnstreamThe d dy smmer re ver t t

nteretn t erve tht the wntrem enery

nrnce mrket cntne t emntrte the

torpid summer-lie trend that has eisted now forever mnth.

As we move into the autumn and winter months and the significant Q4

renew, w we cntne t ee th me precte eenty t

tren, r w the mrket emere rm the mmer wth renewe

prpe n vr t ether ten n rer t che mrket hre, r try

t hren n mre ecve, etermne mnner? Wht r re,

htrc t hw tht the wntrem mrket never ty ttc r

n.

In our last edition of the Energ Maret Monitor we highlighted the

wn key mrket tren:

A return of greater loss frequenc in Q1, both operational losses andhh pre e ce y ntr cttrphe

In Q2 and beond oil and gas loss frequenc subsided

Nn ntr cttrphe rte n ener were t n eenty t

eve. Ntr cttrphe ccnt were recevn rte ncree

about 10%

Maret capacit levels remaining at ten ear high

The ntcptn n ve vere hrrcne en

an expecttn tht the wn nt w, prcn w ecmemre cmpettve 2011 prree

snce r t etn tte h chne. We re t wtn the

tcme the hrrcne en. athh hrrcne irene ce

ncnt me, n n cmpne were, t r knwee,

ery ecte. Crrenty, t pper thh the en w nt

rn the re nmer e ntcpte n therere the mrket

w remn necte.

s the qetn remn; wht w hppen next?

in rer t try n prect the mrketevtn r te 2011 n 2012, we w k

t the mrket tt, pt etween Nrth

amerc n the ret the wr.

NORTH AMERICAN DOWNSTREAM

MARkET

As we enter Q4 2011, insurers continue to

eek cetn rte/premm rectn

e t cmntn vere pertn

htry n Nrth amerc, recent ntr cttrphe event n ncree n

ther renrnce trety ct. depte thee

cncern, ver ve cpcty enery

excee emn n wntrem nrer

hve et the mrket. depte n ncree n

pertn cm n 2011, t eem pprent

tht thee e hve nt prce n

ern cpt.

dwntrem cpcty r Nrth amercn

rk remn rm; n exce us$2.5 n

n tt cpcty wth ver us$1.5 n

ve t htrcy very cmpettve

term. one recent evepment nvve the

retrctrn tht h tken pce wthn

Chrt/lexntn wheren the rm hve

mve rm three eprte prperty

vn t tw vn. bth Chrt n

lexntn hve ncte tht th

cmpne w cntne t nerwrte

wntrem enery rk thrh yer en

exectve wrk thrh the prce

hw, r , ther repectve wntremenery prperty cpcte w e

re-deploed in 2011 under one single

vn r enery rk.

a cer exmntn the Nrth amercn

wntrem ectr reve tht renew

ret hve vre epenn pn the

ne ectr. Jne n Jy renew w

nrer ph r rte ncree n ther

renn k, we ther pwer

enertn prt wth mxe ret.Recent Q3 losses in the downstream sector

my ret n tn c r rmn


5/12

Marsh 5

rte wthn pecc ce wntrem ne.Hwever, the mtrem ectr renew cntne t

emntrte t t ht rte rectn mt the

petrchemc ectr. The nhre renewe pwer

enertn mrket remn the mt ctve mrket; r,

wn n m prject cntne t ttrct nvetment

rm the cpt mrket n nrer re revey

cmpetn r mrket hre. Wth crc us$2.5 n n

capacit, marets such as G-Cube, Chubb, Chartis,

Trveer, Zrch n lerty, we ht ther

nrer, cn prve r mre cpcty thn there

emn r n t qetne thw n th ttn cn e tne

ere we ee me nrer eve the

mrketpce.

Cery, the mrket remn n tte

trntn wth t renew en the

nrm, n wth me m rectn.

Q3 did see some accounts renew with

m ncree; enery the wth

ncnt e, re mt reqrement

n/r ncnt ntr cttrphe

expre. r ccnt wth vere t

recr n vere r etter

cntr, renew ret trene t

ne t rte ecree t t.

Renewals that achieved reductions did so

y hhhtn ther et c tt, retrctrn

ther pcement n entyn revey prce

repcement cpcty. We nt ee ny cte

cmpetn pcement n there w tte ny prere

n cvere term r ecte. sme renew

hwever, nt rech cmpetn nt jt ere expry

as some insurers had to re-model using RMS 11 whilether ey were ce y ttempt t evere

mprve term.

The prn n trn h mnm mpct n

Q3 renewals. Hurricane Irene has wored its wa up the

et ct the usa n ck nt the atntc ocen.

int repne rm wntrem cent wth et ct

expre ncte tht e were mnm n we re nt

wre, ny ncnt e t the wntrem ectr

rm irene. We re nw we pt the pek hrrcne

en n, whe there h een n ct trm

ctvty, the ptent r tn, ncnt hrrcnee remn r the next ew week.

The much discussed release of RMS 11 has impacted the

wntrem mrket; the new me ect ccnt tht

were nt eeme t e expe t mjr hrrcne e.

The ret h een thtenn thre cpcty t

t te we hve nt een ny ncree n prcn r

retentn r the expre. T the extent tht yer

ece t prche tn atntc Nme Wntrm

(ANWS) limits, we ma see premium increases driven b

cmpettn mnt yer r veaNWs cpcty. Htrcy, enery ectr

nrnce yer hve emntrte

wnne t retn tnt rk n

hve rene the prche ntr

cttrphe cvere when they nt

ee they c jty ncree prcn t

ther enr mnement.

in cncn, whe nrer cntne t

c n rte ttn, t remn

entrey pe tht ent ncnt

hrrcne trm ctvty, mpctn the

downstream sector. Q4 renewal terms

my mve n the yer rectn

nrer wrk t meet yer en et.

INTERNATIONAL OIL AND GAS MARkET

After an almost flat maret period during Q1, Q2 and Q3

we believe developments in Q4 should be much more

nteretn r yer nterntn n prperty

nrnce.

There n t there w e retnce t tenn

rte, prtcry ret nerwrtn mnement

ctte. Hwever, the mrket nment the

nterntn n k re ch tht we ee t tht

th prt the ver enery k, t et r nn ntr

cttrphe ne, my ten t me eree ver the

next tw qrter.

it wey ccepte tht the pre nterntn n

boo has been profitable for most underwriters

epecy ver the ner term. Whe mny nerwrter


6/12


wrte rer entn enery ncn pwer,mnn n ther prce ntry ccnt, we eeve

the nterntn n k y r the mt

ttrctve eement n therere mrket re prepre t

cmpete r mrket hre.

The ct tht mrket cpcty remn htrcy hh, t

approimatel US$3.5-US$4 billion, means that there is a

rp cpcty t wrte the mjrty expre.

We nertn r n 2011 there hve een t

us$800 mn wrth e. Hwever, y rcctn premm vme th h t w r

prt r nerwrter r 2011 n

the nterntn n k n

th ttn e nt ncnty

eterrte rther.

be n prtty, the exce

cpcty n nee the wh t meet

en yer et, t w pper tht

mrket w n wy t cmpete n

try t rw ther mrket hre. Th

cmpettn my ent retrctrn

prrm r chnn e nrer t

the en ret h e tenn

rte t me extent. inee wrtn

we hve rey een me ccnt

rectn n ject t mr

pctre we w expect t ee th tren

cceerte twr the en the yer.

The ver mrket ttn certny ecme very

trnprent when new pece ne cme t the

mrket. unerwrter re prepre t cmpeterevey n er hhy cmpettve term t tn

e r vre prtcptn.

Hwever, cent whe ccnt hw pr recr,

and in particular losses in the last 12 - 24 months, the

mrket eem t e tkn rther nne vew n we

hve wtnee ncree r th ctery nywhere

between 10 to 300%!

Cery r ntr cttrphe expe ccnt the

ttn w e mewht erent ern n mn thec n thee expre wn the vr ter n

2011. Hwever, rm wht we hve een th r we nt

expect rc chne n term r thee ccnt,although a modest rate increase of approimatel 10%

h e expecte.

So what could de-rail our optimistic view of the Q4 2011

mrket n nee the 2012 mrket? The mjr ptent

e w e rther ncnt e n the

ecnmc ttn.

The effects of the new RMS 11 model are also still to be

y nert; tme w te hw th ect term n

cntn n cpcty te.

T te n 2011 there hve nt een ny

nrnce cpt event n rk e

re enh t chne the mrket. The

ecnmy crrenty n thrh

nther per trm n t ncertn

th w ect the cpt cmmtte t

the nrnce mrket. The nrnce mrket

tt eenty rven y cpcty n,

nt there mjr wthrw cpcty,

we eeve the mrket w remn ry

t.

Hwever, we pprch the mjr 1t

Jnry trety renew en, there e

pper t e cnere re rttn

rm the mjr renrer. We hve yet t

ee th h me eect n recn

mrket cpcty n 2012.

We hve een, n rect ne, n ncree ve

etween the nrer n renrer n ther mrket

ttte. it pper tht the mjr ntr cttrphee ere y the renrer h rete n mch

hrer mrket ttte thn the mre pect nrer

wh ry recne tht the n k h

ere very ew e rm the recent pte ntr

cttrphe. a ch we hve een me recent

mvement n mrket hre rm the renrer t the

nrer n expect th tren t cntne.

in cncn, ter retvey qet n t mmer

per n the nterntn n wntrem mrket,

we expect etter new r yer wth me cmpettnremn n rtn eve ptenty tenn, et t

mer pce thn n prev yer.


7/12

Marsh 7

casUaltY

bolT uPdaTE

ce wth ncnt mrket ckh, t pper tht Tm

Bolt, the Performance Management Director of Llods, is

wn t cmprme mewht rm h ect t the

ly Enery mrket t mmer. on the 29th Jy,

2011, PMD Bolt issued a statement to all Llods

yncte, tht:

a enery te wrtten n ly w e wrtten v

tn ne pce

Th mnte crrenty nce ty wthn pcke

n ptn wthn oEE

First part ROW contained within liabilit placements is

mte t e ty t w

lmt mt ce r nteret, reqrn Jnt Ventre

Ce

Pce w reqre n nn rete mt, n e

written with a combined single limit (including

additional insureds)

lmt mt e ncve e ct

ly yncte mt jty ther prcn

methy n mne ther retn mt

mnt nre wthn ther prt

Th mee h een met wth ncnt retnce rm

the ly mrket ven cncern tht ther vrtmnpy the hre ty pce w nw e ner

direct competition with Compan marets. Moreover, the

rkn cmmnty h phe ck ver cncern tht the

ncnt ty cpcty ve v pcke c e

tnty rece n r cent ty t prche

eqte mt c e jepre.

In the face of this pressure it seems that PMD Bolt is willingt cmprme n the key e ty cmpnent

pcke. bt h nrme the mrket tht where

eprtn ty rm pcke eeme t e et

prctce, ty wrtten v pcke n 2012 the

prcn n ptent retn mt e jte y

ty nerwrter wthn the yncte.

depte th cmprme there remn cncern tht there

w cntne t e ntnry prere n the prcn

enery te n rwr n nerwrter k t

mne ther retn mnt nre, ty

cpcty expecte t e retrcte wthn ly n 2012.

Moreover, there has been no such compromise on the

et prctce retn ty mt n mvn

ty mt pce n r re nteret t

cn r nteret t th pnt. seprtey, there

cncern tht trety renrnce renew r ly

yncte w reqre the yncte t mntn eprte

net ne r prmry n exce yer when wrtn

ty v pcke n th c rther netvey

mpct the vty n prcn enery te n

the future, beond the impact of PMD Bolts edict.

usa liabiliTiEs

The primar maret for US-domiciled liabilities remains a

cmpettve envrnment wth ever mrket wn t

cmpete r th pce. gven rnc rwth us enery

cmpne, prjecte expre re n the re whch n

turn leads to increases in primar premiums. Moreover,

cty nerwrter revene cntne t e rven y

tn premm rm t n expre pcement.

Where nerwrter h een wn t er rte

rectn t prty et expre ncree n thepast, now the are now looing at flat rates (or even rate

increases in some cases) against increased eposures,

ne ce wth cmpettn. The mrket r prmry

te n the unte stte cntne t experence rte

prere ncree rm Chrt, Zrch n ace n

renew, hwever, thee prmry crrer remn

cmpettve r new ne. in tn t the trtn


8/12


nrer, vr whee rker hve cce t veptn wth ty pcement tht nce ttrctve

pollution terms and co-ordinate with coverage offered

ner cntr we pcement. The lnn mrket

remn ve ptn r us prmry ty pcement

r rk tht hve experence vere rt n the

pt we.

The mrket r exce te hwever ecmn

mch mre chenn. a ntr ter cntne t

mpct nrer ttm ne, ty nerwrter re

een mnement prere t w the crprte nee

t ncree rte n premm even the ty

eperience is not impacted b losses. Moreover several

evere enery ty e n the tty, ppene n

hre ptrem ement hve ce mny mrket t

revte hw they prce enery te n rwr.

Claim paments from Macondo and other North American

ptn event re trtn t mpct me the e

mrket. Exce mrket re cey wn the

cntrct ty enrcement n the pprtnn

responsibilities arising out of Macondo with concern for

ccmtn mnt the nre wthn ther prt.

The cntrctn cpcty r exce enery ty r

us mce rk cntne t mpct pcement,

epecy exce us$200 mn. The us metc

mrket t e t prve e mre pce n

follow-form occurrence based ecess liabilit limits up to

us$150 mn t premm re ncren n the rne

of 8-12%. The low-to-middle part of ecess towers has

ecme exceeny hrer t pce. stretch cpcty

marets (especiall in Bermuda) want higher attachments

and up to 100% increases in pricing from 2010. A number

berm mrket hve en retrctn themnt cpcty they w er enery ccnt,

epecy rn/ervce cntrctr, mnctrer,

pipelines, and accounts with an offshore Gulf of Meico

expre.

Erpen mrket re trn t cmpete wth the

crrent prcn Enery ty pcement n hve

therere nt prve mny terntve t the berm

mrket crnch. Hwever, mre trtn metc mrne

mrket re ncreny wrtn th pce. We etmte

tt ve mrketcpcty r us

e enery rk

t e n the re

us$1.1 n,

hwever, the

wrke cpcty

rm the crrent

prcn tnpnt

mch e.

aretn

mntrn h

prree

wrwe wth

crrer n

epecy the

tht hve mtpe

nerwrtn

platforms. Reinsurers are also more restrictive with treaties

n wth cptve renrnce where they re n the

ckrn n ncnt enery cpcty pcement.

There cncern tht renrnce ct r enery ty

w ncree ncnty n 2012 n th c e t rther hrenn th mrket.

it nter n th chenn mrket tht rk re

preente wth ete nerwrtn mn.

Ptve ppement nerwrtn nrmtn crtc

t ettn the et ret. i ve, nerwrter cn e

ptvey nence y mpe cpe cntrct wth

vre nemnctn, cntr reprt

(especiall for refineries, petrochemicals and pipelines),

n where experence h een vre, ete

information should be highlighted. Face-to-face meetingswth nerwrter wth the cent preentn ther wn rk

re crtc the mrket then. sme

nerwrter hve expree cncern t wrtn

ne where the cent e nt meet wth them. Never

ere h t een crc t tnh ech rk et

n c n therere ete mn n mrketn

meetings remain an integral part of this process. Moreover,

n rer t cheve the et pcement ret t

ve t mrket ech rk y wthn the bermn

n Erpen mrketpce n tn t the metc.


9/12

Marsh 9

INTERNATIONAL LIABILITIES

it cntne t mze n cnn nyt the

nterntn cty nhre mrket tht the prcn

tren cntne t e wnwr. Th theme h

cntne ver nmer qrter n t cntrct the

experence mny us cty mrket tht nre the ,

, pwer n petrchemc ntre whch hve een

ht hr wth e ver the t 18 mnth. Where us

mrket hve recte ccrny wth re percente

re renew premm, the nterntn mrket

pten n n mny ce thrh cmpettn, prcn

ecree re t cheve.

The peculiarit is that the onshore international (non North

American) casualt maretplace is still awash with capacit

whch remn eer t ctvey ht r ne y

ern ttrctve premm term n cntn. Th

mrket cntne t e ree the cttrphe cm tht

re rpy chnn the cmpexn us mce rk.

Australian bushfires are the onl large-scale losses that

mntn hh vty n th pce, t thee hve nt

h ce t the mpct tht the re Nrth amercn

ptn n expn e hve h t tht mrket.

The nterntn mrket wrte vere rry rk

cr ever terrtre n ntre. oten the r

ne cpcty cmmtment per rk hve een wer. a

ret, vere cm ctvty h e t nrve ne

crrer n the wy tht t h r the wrtn Nrth

amercn enery ty whch h experence hher

reqency evere e wthn the t ten yer. We

etmte the tt cpcty ve r nterntn

enery ty rk tht re nt expe t Nrth amerc

or offshore is currentl upwards of US$1.7 billion.

The htrc prte rt r nterntn nhreenery ty h encre me the rer crrer

t trt mntn th pce wth re cpcty

commitments. QBE, HDI, Allianz, Zurich and Chartis have

ncreny ce n ppyn extremey re

cpcte nt prmry yer where the k the

premium resides. Lines of up to US$100-150 million are

nt n. The ntr prren th h een the

emncptn the ren nerwrtn centre n

c cty ern r rwth ecnme v rnch

ce. Chrt n d, a Pcc n eewhere

prve ret exmpe they re e t er c

cpcty r c rk t cmpettve prcn.

Th mrket remn chenn when ke t wrte rk

wth ncnt hre n/r Nrth amercn

expre. Hwever, the nterntn nhre cty

mrket remn cntent n ecnmc mrket pce

t cntne t y mt n n ener, we nt reee

th chnn n the ner tre.


10/12


cOnstrUctiOnOFFSHORE CONSTRUCTION

The ene tht the hre cntrctn mrket

treading water in anticipation of significant and maret-

enn event h een hehtene n recent mnth.

The flow of mid-size business to the maret has been

cnere nvetment n new prject, r rther then nvetment ecn en tken n prject tht

h een te rn the nnc cr, h

ncree rmtcy.

Almost unnoticed, long-awaited mega-projects have

cme t rker tener nt yet t mrket. Cncrrenty,

cent, nerwrter n rker entn wht

cnttte prject hve nte. Tw yer

re prject my hve een ne wth n Etmte

Completed Value (ECV) eceeding US$500-750 million.

Ty cnventn tee jcket ptrm n merte

water depths can easil cost US$1.25 billion (plus

pipelines, etc), and FPSOs and TLPs US$2.0 billion plus.

The cntnn tren r the nrer tht cmpny

e nrnce n cptve prtcptn hve ncreny

retrcte the hre the premm enerte rechn

the cmmerc mrket.

However, we define mid-size projects, gross values/

expre/ECV, r net r rer t cmmerc

mrket nrer, t cer tht there t cnere

cmpettn where cpcty nt n e. innvtve

rtn me hve met wth cent cceptnce wth

r enh cmmnty mrket t tve pwr

prere n rtn eve.

it ntcee tht where tnt ECV

cmne wth re cmmerc mrket rer,

cnen nerwrtn qcky tke ver. Whe prce

re nt necery rn, term wth trn eerhp

rm pne repecte eer t nee t tck t

xe r wn mrket t enre cmpetn, n the

rer mrket nt tmtcy wn eer. a

cmntn ccepte per, ecte n trn

cent rk mnement n prtcr re eent t

ecre r wn mrket pprt.

bt th ny h the try. a ere me prject

with ECVs (and sometimes EMLs) in ecess of US$5.0

n w cme t mrket n the next x mnth. in mnyce, even tnt cptve prtcptn w nt

vte the nee r rk trner cpcty n exce

most armchair estimates (b which we mean theoretical

cpcte ntete y prce r rk ppette retve t

specific project). These projects include the first Floating

LNG (FLNG) projects, but it is a measure of how the scale

n ct hre prject h mve n n retvey

hrt per tht pcement trtee evepe r

lNg re nw en pte r re cnventn

hre evepment.

The extent n reqency t whch ECV re nw n t

excee nrnce mrket cpcty h nt een een nce

the ery y the Nrth se. at tht tme the mrket

ery ccee n evern yer cpcty nee

rn tme npreceente ve n rp ntn,

emne tht rker evep trtee t mnme

the ntry expre t pprtntc rtn

emn rm the nrnce mrket. in tht ene we re

very mch ck t the tre, n rememrnce

thn pt my we prve ce t hw t mne

the ppy n emn eqtn r cpcty tht ce

ty.

Finall, the woring parts final draft of the new WELCAR

rm h een reee t the ennn octer r

cnttn wth nterete prte.

The offshore construction team at Marsh is currentl

nyn the rt n eekn cent eeck t

enre we preent trctre repne t the wrkn

prty.


11/12

Marsh 11

ONSHORE CONSTRUCTION

The nhre enery mrket r cntrctn rk h

cntne t remn n t cyce cntn epte the

recent ntr ter. Hwever, nrnce mrket nw

mntr cey ther rete ccmtn t

ctn expe t ntr cttrphe event.

The ccrrence mny ntr cttrphe wthn

retvey hrt per tme h prmpte me

nrer t pne pcy tht the mrket kn t

chne. Hwever, htrcy the cntrctn mrket h

wy een wer t rect t mrket cyce chne thn

t pertn peer. We hve een tte evence ny

mrket hrenn n recent mnth.

depte the ecnmc cr pttn wnwr prere

n nrnce nvetment retrn, whch n mny ce

required the re-capitalisation of balance sheets, rates have

cntne t ten n the t yer.

The nrnce mrket wn trety renew re expecte

t e mpcte, epecy the prcn me r ntr

catastrophes (Nat Cat). It is anticipated that the cost for

Nt Ct cpcty key t ncree whch w hve

eect n the rte prject cte n hzr re

Hwever, the mjrty thee renew re nt e nt

the en the yer th w nt mmetey e pe

wn thrh the nrnce ppy chn t the cent

nt t et 2012. The ret the trety renew w

e mntre wth ret nteret t whether they rnny cer ntentn chne.

sme the wnwr tren mrket cntn

(including price) can be attributed to the basic principles

ppy n emn; there re crrenty t mny

crrer chn t ew rk. it r th ren tht the

mrket w n t ct t mpe ny en prcn

ncree, ctr whch h een pprent n prev

mrket cyce. The cntne ecentrtn the

prncp mrket centre w cmpn th rther n nr pnn w ey ny pwr prere n

premm rte.

Whe the cntrctn ntry ectr h nt een

mpcte y the recent ntr cttrphe event n

term the

qntm

e hevy

the ener

prperty ectr,

the key rety tht the mrket

w e kn t

mke wer

chne n the

n term.


12/12

In the United kingdom, Marsh Ltd. is authorised and regulated b the Financial Services Authorit for insurance mediation activities onl.

Marsh Ltd. is authorised and regulated b the Financial Services Authorit for insurance mediation activities onl.

Copright 2011 Marsh Ltd. All rights reserved.

For more information

please contact.

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terrOrismThe terrrm mrket h h retvey ctve yer. depte me

reprte e, the mrket t cntenty cmpettve.

The thret new entrnt n the mrket tht hve rrve n the

pt yer cntnty chene the trtn eer t mntn

rte. The new entrnt n the ethe mrket re n cntnt t wr. They re tryn t mntn ther extn k

wht rwn t wth new ne. Th mke the terrrm

mrket try nqe.

The political climate and instabilit in the Middle East has had an

mpct n hw the terrrm/ptc vence prct vewe.

Ris managers are increasingl seeing it as a necessit rather than

ct tht cn e ve. We hve een rer nmer

enquiries from the Middle East that are turning into rm orders.

Th refectn the chnn ttte n rwn

mprtnce the cvere.

The mpenn trety renew w nt necery mpct

terrrm rte. Hwever, t w e nteretn t ee

nerwrtn ene ecme mre trnent n hw mrket

will handle their portfolio in a dicult nancial climate.

NATIONAL OIL COMPANIES CONFERENCE

saVE THE daTE

6-8 FEBRUARy 2012, DUBAI

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