Geopolitical uncertainty is creating increased need for transition risk management, according to a new report by WTW.
The WTW Energy Market Review 2022 shows the need to manage energy transition risk is being accelerated by the requirement to seek alternatives to oil and gas, following the recent Russian invasion of Ukraine.
The report also looks at the volatility of the energy sector, as commodity prices surge to new highs as a result of high demand from economies emerging from the Covid-19 pandemic.
Although hardening of the energy insurance markets is easing, energy companies are going to need better data, more convincing ESG strategies and careful monitoring of underwriting trends to successfully manage any future market volatility.
Graham Knight, head of global natural resources at WTW, said: “At the moment, the scales are finely balanced in all our markets; on the one hand most portfolios have returned to profitability, while on the other, the absence of any fresh underwriting leadership and a reluctance of insurers to ‘break ranks’ is preventing brokers from forcing through any fundamental changes in market dynamics.”
“In the meantime, energy transition will wait for no one; every risk manager involved in the industry will need to address the uncertainties arising out of both the new geopolitical landscape and the mounting momentum towards achieving net zero emissions targets,” he continued.