Speaking at Lloyd’s, Ace Head of Global Energy, Roger Giddings warned that a decade of under performance and losses did not instil much confidence in capital providers to invest in the offshore energy catastrophe classes

In answer to a question from the audience at the event in the Old Library at Lloyd’s Mr Giddings said; “If I was a capital provider I would not want to commit to offshore energy catastrophe business, because there does not seem, as a whole, any rationing of or distinction over what type of risk will be assumed or accepted.”

He added that over the past 10 years the offshore market has been badly hit by catastrophe losses and it is how the market handles the assumption of future catastrophe risk that poses the biggest challenge to the sector bar none.

He also warned that unless something was done the market faced being left with a shrinking risk pool and the fewer risks left being those that the risk managers did not want to self insure.

“We have seen a move towards self insurance last year,” he explained. “There is talk that there may be a move back to the traditional markets but in my experience that is not often the case. Risk Managers who have say four financial quarters where they have not paid out large insurance premiums tend not to want to go back to doing so.”

He called for the market to look at the introduction of an industry wide pricing model similar to that which is in operation in other classes in an effort to bring a greater degree of analysis in to the pricing of catastrophe risk to enable the offshore sector to better be able to weather natural catastrophes particularly on Gulf of Mexico storm risk.

He said the marine hull and general property sectors, from which the offshore market had traditionally been seen to emerge, were better able to cope with the impact of catastrophes as had been proven in the comparative loss ratios of the three classes over the past decade.

He said the reason was marine hull underwriters were operating within their “core competence”, something that did not seem to be happening in the offshore energy markets.