A.M. Best Special Report: Specialty Energy Insurers Keep Pace With U.S. Customers, Competitors

Specialty insurers operating in the energy sector consistently have produced positive operating results over the most recent five years (2009-2013), as measured by pretax operating returns. This is largely the result of very strong investment income supplementing underwriting results, which have been more volatile over this period.

This special report looks at the specialty insurers and industry captives (together referred to as the “specialty group” or “group”) competing with the commercial insurance market for the energy sector’s insurance premiums. A.M. Best’s universe of rated specialists consists of eight insurers: four specialty insurers, three single-parent captives and one electric cooperative, which operates as a reciprocal exchange structure serving rural utilities.

The group’s risk profile is quite high, reflecting the industry’s exposure to property catastrophe events. As a result, although positive, earnings have varied widely over the past several years, with the group’s combined ratio fluctuating from a low of 90 to a high of 140, with a five-year average combined ratio of 104.

Notwithstanding, the variability of the group’s operating and underwriting results has compared reasonably well with the commercial casualty composite. The five-year combined ratio (before policyholder dividends) of 104.0 through year-end 2013 was slightly more than the 102.9% of the commercial casualty composite. The group’s after dividend combined ratio of 109.4, against 103.2 for the composite, reflected some distribution of profits by the group to the members.

To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=227204.

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