Energy risk reinsurance

Energy is one of the most capital-intensive and technologically complex industries. It includes oil and gas production, refining and petrochemicals, pipeline transport, thermal and hydro generation, renewable energy sources and electricity grids. Energy facilities play a key role in Kazakhstan's economy, and their value and concentration of liability usually exceed many times the retention capacity of local insurers. A significant part of the industry's risks is therefore reinsured, including on the specialised international market.

Main segments

  • upstream — drilling, fields, well control, the costs of killing the well and re-drilling, pollution from a blowout;
  • downstream — oil refineries and petrochemical plants, gas processing complexes, storage facilities and terminals;
  • pipelines — trunk and field lines, pumping and compressor stations;
  • power generation — thermal, gas and hydroelectric stations, substations and grids;
  • renewable energy — wind and solar plants, energy storage systems.

Which risks are reinsured

The core is property all risks, including fire, explosion and natural disasters; breakdown of machinery and equipment — turbines, generators, transformers, compressors; production interruption; construction and erection risks of new projects and modernisation; and third-party and environmental liability. For production, the specific risks of well control are added. Large facilities are more often placed on a facultative basis, and portfolios of homogeneous risks within treaty programs, although many treaties exclude energy from their scope, leaving it for separate placement.

Underwriting features

Reinsurers rely on technical analysis. Assessed are the technology and age of the equipment, the manufacturer and the presence of prototype solutions, maintenance programmes, emergency and fire protection systems, the qualifications of staff, and accident response plans. Risk engineering reports and an estimate of the maximum possible loss are mandatory. For new projects the contractors, schedule, testing and maintenance period are studied. Market capacity for energy is limited and sensitive to large industry losses, so the quality of the information directly affects the price and the possibility of placing the risk.

What is usually excluded

  • wear, corrosion, gradual deterioration, and defects known before the start of insurance;
  • prototype equipment without operating experience — or subject to special terms;
  • gradual pollution, where only sudden and unforeseen pollution is covered;
  • war, political risks and terrorism — unless included separately;
  • losses connected with breaches of sanctions regimes.

Key terms

  • sums insured and the value of the equipment, the valuation basis, limits and sublimits by section;
  • deductibles for property and breakdowns, and the waiting period for production interruption;
  • the reinsurer's share, the cedent's retention, leadership and follow-the-leader terms;
  • warranties on compliance with risk engineering recommendations;
  • territory, the project period and the procedure for settling large losses.

What data is needed for a quotation

  • the technological profile and composition of the objects, site plans;
  • sums insured, the value of the equipment, and data on annual revenue or gross profit for production interruption;
  • territory and the project period;
  • the existing terms of protection and the loss history.

How Polis Re helps

The Polis Re broker prepares underwriting information to energy market standards, arranges interaction with risk engineers, selects reinsurers with industry expertise on the domestic and international market, agrees the terms and supports settlement. Related risks are in the property and construction section. To get an offer, send a reinsurance request.