because the view is that companies canât make money amid the volatility, says Graham, who focuses on the demand side of the oil and gas sector. As a result, insurers donât see the premium equation working in their favor, and theyâre pulling back the amount of exposure they want on their book. âThe demand for the quantity of petroleum in the US moves over the economic cycle, but it moves fairly predictably and not in great swings,â Graham says. âBy focusing away from the commodity and more on the demand side, we can smooth out our exposure and smooth out our results over the cycle.â The US-China tensions arenât helping, either; oil prices have been fluctuating as investors worry that the back and forth between the trading titans will limit demand. Nonetheless, many experts still anticipate good results, considering that the Permian Basin in West Texas is booming with oil. âThis is feeding some of these countries involved in the trade wars,â Sizemore says. âItâs still to be determined how it all plays out, but itâs important that key pipelines and certain aspects come into play so that the Permian can keep supplying oil and gas [and] we can be that exporter.â
âThere have been a lot of companies that have paid some very sizable claims over the last few yearsâ
WHY MAKE RISK RISKIER?
Heath Cunningham, AmWINS Entrances and exits The last two years have seen carriers come into the oil and gas space and then promptly exit. In a boom-and-bust cycle, that type of insurance landscape is to be expected. âWith massive growth, youâre going to have massive losses, and a lot of it is stemming from aspects of oil and gas operations that these losses are coming from, such as trucking,â Sizemore says, again highlighting the situation in the London market. âA lot of losses are energy-sector-based, and Lloydâs is one of the biggest energy sector providers, so it is trickling down. Weâre seeing a tightening of the market, but a lot of that has to do with the massive expansion of the market as a whole. When it gets big, it usually is elastic and rebounds to where it needs to be.â Drilling down into components of the industry, midstream oil and gas accounts in particular are witnessing a tightening in the insurance market. âRight now, weâre seeing rate increases on the midstream
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