Rate Softening in the Energy Market: Insights from Willis Towers Watson's Latest Review

On November 13, 2025, Willis Towers Watson PLC (NASDAQ: WTW) released its latest Energy Market Review Update, revealing significant trends and insights into the evolving landscape of the energy insurance market. The report suggests that the ongoing rate softening within the energy sector shows no signs of slowing down, which presents unique opportunities for insurance buyers as they approach 2026.

The report highlights that the upstream energy market continues to thrive, largely due to record low loss activity attributed to improved risk management practices and enhanced asset quality. Insurers are reaping the benefits of this profitability, with the report indicating that the softening of rates has accelerated since the previous review in April.

As insurers focus on retaining well-managed risks, long-term relationships are increasingly being rewarded. This shift has created a favorable environment for businesses that have demonstrated strong operational histories, allowing them to negotiate better terms during renewals.

In stark contrast, the downstream sector has encountered significant hurdles, with reported losses amounting to approximately US$3.5 billion this cycle. Claims have reached levels equivalent to market premiums, with the majority of major losses—six out of eight—occurring in the U.S. refining sector. This situation has placed clients with U.S. exposure under heightened scrutiny.

Despite the challenges, businesses with clean loss histories may still find advantageous renewal terms, while those with recent loss activity should prepare for a more conservative market approach. Observations indicate standard reductions of 10-15%, with competitive tenders potentially yielding reductions of 20-50%.

Willis Towers Watson outlines several critical trends that stakeholders in the energy sector should monitor as they transition into 2026:

There are ongoing challenges associated with long-tail risks in upstream construction. However, underwriters are increasingly willing to accommodate these risks where existing operational relationships are in place. Companies are advised to leverage these relationships to enhance their construction placements.

The subsea construction market remains characterized by restricted capacity, leading to what can be described as a micro-hard market. In the context of a generally soft market, some insurers are looking to write limited subsea construction policies to bolster their premium income.

The behavior of insurers in purchasing high-level top-up layers on capacity assets will provide valuable insights into their strategic direction. This data will indicate whether insurers are focused on maintaining and growing their market share or adjusting their budget expectations downward for the upcoming year.

A healthy capacity and positive loss ratios have contributed to a softening in the international liability market. This is a notable contrast to the hard conditions prevalent in the U.S. casualty market, where social inflation and nuclear verdicts are driving reductions in exposure lines and programs. Additionally, new European legislation promoting class actions raises concerns about potential increases in liability claims costs.

Rupert Mackenzie, global head of natural resources at Willis, emphasized the favorable conditions for insurance buyers. "Insurers have reported strong financial results at the end of Q3. The ongoing oversupply in capacity and insurer appetite for growth is simplifying previously complex verticalized placement structures, yielding premium savings for clients," he stated. Mackenzie highlighted that energy companies renewing in Q4 2025 are well-positioned to negotiate not just price, but also conditions.

The Energy Market Review Update from Willis Towers Watson highlights a dynamic and evolving landscape in the insurance market for the energy sector. As the market shifts into 2026, stakeholders must remain vigilant and ready to adapt to the changing conditions, particularly in light of the disparities between the upstream and downstream markets. With a strong negotiating position and a keen understanding of emerging trends, businesses can optimize both cost and coverage effectively.