Gordon McBurney, President and Chief Underwriting Officer, Liberty International Underwriters will deliver the keynote address tomorrow and he says the market could not be meeting at a more opportune time as it stands at a crossroads.

“As this year’s Houston Marine Insurance Seminar gets underway it strikes me that we’re meeting at a time of significant change and challenge for the marine and energy insurance business.,” he explains. “The Macondo Well incident has finally managed what the insurance industry had singularly failed to do in recent years and turned the tide on declining and unsustainable offshore energy rates. It has also triggered a tighter regulatory regime for offshore drilling and perhaps even more significantly for the insurance business, has further exposed the increasingly interconnected and systemic nature of risk in today’s global economy. “

He warns the political fall out from the loss will be a core concern for the market.

“If anyone thought the permanent cap on the well meant a return to ‘business as normal’ for the offshore industry, they had reckoned without the political desire to impose new regulation on the industry,” explains Mr McBurney. “This is likely to include the lifting of the environmental liability cap and the introduction of new safety and maintenance guidelines, which could significantly increase the cost of offshore operations not just in the Gulf but globally. Against this backdrop, the energy industry is suffering as a whole from the economic downturn which has hit energy companies as well as the many exploration and production support and service companies.

“The insurance industry in turn has also reacted. A changed rating environment and more careful focus on terms and conditions are already in evidence, but Macondo has also reminded us of how one loss can have ramifications in so many different areas; from the material loss of the rig itself through to the clean-up costs, environmental liabilities and business interruption costs of companies both directly and indirectly involved.

He adds: “This growing level of systemic risk means that technical underwriting skills will need to continue to improve while service levels will increasingly become the differentiator in a homogenised market.  It also means that never has the need for longstanding relationships between insurers, brokers and clients been as important as it is now.

“Insurers with proven financial security who have weathered past catastrophes and have a long term commitment to the industry now have an opportunity to be rewarded for their longevity. Buyers looking at new entrants should be encouraged to question how long this new capital will be around.”