"What we are seeing is a trend for underwriters to offer more limit and try to keep the price the same," he said. "They recognize that these buyers are not as emotional as last year, and that they are looking for something different."

Mr. Kaiser noted, however, that "most carriers are now managing their exposure to the London-based concept of Realistic Disaster Scenario--which is basically the worst possible thing that can happen."

And while some buyers may look for rates to ease a bit after the benign 2006 hurricane season, Mr. Kaiser warned it will take two or three years for those 2005 losses to be paid off.

Jim Pierce, Houston-based managing director of the global energy practice for Marsh, said that post-Katrina catastrophe covers are no longer blended into traditional policies. "The reinsurance industry put a stop to that," he noted.

In industry parlance, upstream risks--refineries--have seen some softening in 2007, "except for the catastrophe market, in which we are still seeing a very limited amount of capacity," he said.

The biggest change took place in the first renewal season after the storm, when primary companies were faced with reinsurers that had new agendas.

"Prior to Katrina, when one purchased coverage on one's assets against well-controlled blowouts, one would buy coverage on an occurrence basis so a buyer would have protection for multiple occurrences for the assets and operations, including catastrophe," Mr. Pierce said.

But the majority of treaty renewals for Jan. 1, 2006 offered to primary insurers defined aggregate amounts of coverage, he noted--adding that insurers, in turn, figured out how they wanted to allocate that aggregate to the direct buyers.

"So overnight, the amount of capacity was reduced tremendously and was turned into one-loss capacity," he said.

As the year unfolded, the majority of offshore operators found themselves in a situation where they could really only buy a fraction of insurance covering their operations. "Nobody was in a position in which they could cover the totality of their operations," he said.

The highest limit Mr. Pierce saw purchased last year was a $300 million aggregate. "If Katrina and Rita had repeated themselves, Katrina would have eaten up the 300 [million] and the buyer would have been bare for Rita," he said.

The offshore market consists of about 70 percent Lloyd's underwriters--such as Wellington, Ascot and Kiln. In addition, AIG, Zurich and ACE also are important players, according to market experts.

"Underwriters now coming out of the box at least are saying they are going to hold the line at the pricing levels they exacted in 2006," Mr. Pierce said.

Last year consisted of what he termed "knee-jerk" reactions from the underwriters facing new reinsurer demands. "And so the direct insurers turned around and demanded some pretty stiff tariff on the price of the capital they were offering to the buying public," Mr. Pierce said.

Meanwhile, insureds were so used to fully protecting their balance sheets that having just seen what havoc the storms could wreak, "with only a couple of high-profile exceptions, [buyers] stepped up and paid the price."

The past couple of years have seen not only exceptional losses for the energy sector, but also record profits for their clients--which plays into the psyches of risk managers. While seemingly it could play either way with newly flush oil companies not minding higher prices, Mr. Pierce and others contend it had just the opposite effect, with buyers showing a new willingness to face more exposure.

For example, oil companies now have sublimits for windstorm embedded within their policies. "You could go to specialty markets to buy excess coverage," Mr. Pierce said. "Those are what we call, instead of venture capital, vulture capital," he said.

Berkshire Hathaway supplied excess windstorm capacity for companies who thought they had to have it. "But if you wanted $100 million worth of coverage, you were going to pay $20 million or $30 million," he said. "So what will be interesting to see is if enough buyers feel compelled to continue buying those excess layers."

Buyers who once felt boxed in are now exploring alternatives--from retaining more risk to the alternative risk-transfer market.

"They are looking for solutions. We are in the process, as a company, of trying to find them some alternative solutions involving the capital market, but at this point we are not prepared to roll that product out," he said.

"It will be more or less a direct insurance product. It will just have different capital behind it, but there is no magic pill because of the extreme difference between the exposures offshore and the capital available," he added.

The rising price of oil means a higher exposure, and Mr. Kaiser has also seen an increase in self-retention in response to tighter terms and conditions. "There have been higher deductibles taken, and there has been more use of captives. And I think that will continue," he said.

Most energy sector reinsurance is purchased through the traditional market or via assumed reinsurance, which facilitates the use of captives and other alternative risk-transfer mechanisms, Mr. Kaiser said.

A rising oil price will also lead to higher business interruption claims, he noted.

"The controversy has always been that when the oil in one of these facilities goes down, it is still in the ground. So there is always the debate as to what is the proper valuation," he said--adding that insurers and carriers can generally come to an agreement of some percentage to use in the case of business interruption claims.

Moreover, while offshore claims take a relatively long time to settle, it is mainly due to the complexity of calculating the risk and not a propensity for disputes, he said.

Onshore risks, such as oil refineries and the like, have not seen post-Katrina price hikes to the extent of offshore counterparts. In addition, for international risks that aren't exposed to the types of hurricane events experienced in the United States, there has actually been a reduction of about 5 percent, Mr. Kaiser said.

Phillip Ellis, London-based chairman of Willis Energy, said that relatively mild price swings for the onshore market after 2005 led to fewer new entrants than the previous such jolt of the 2001 terrorist attack against New York's World Trade Center and a series of oil refinery fires.

Mr. Ellis said that new capacity provided by carriers such as Lancashire Re and Starr Tech has been offset to an extent by the absorption of GE Frankona by Swiss Re and the withdrawal of Vancouver-based Commonwealth Insurance Company, which exited almost entirely from the sector last July.

In addition, sidecars such as Arch Capital's Flatiron Re Ltd. and XL Capital's Cyrus Re Ltd. have also stepped into the breach, which could have pricing implications later on.

Tony Carroll, chief energy underwriter for Liberty International Underwriters, noted the energy sector lost some capacity when nine insureds withdrew from the OIL Mutual Insurance Company. "We have responded well, but the prices will go up," he said.

Mr. Ellis said insurers may at first take a hard line in not offering coverage at reduced OIL rates. "However, our own experience has been that when push comes to shove, insurers may prove more flexible than these initial comments may suggest," he said.

Although the energy sector has unique characteristics, it does share some traits overall with commercial risk in general.

Mr. Ellis noted that while the market develops a price for an insurance product that does not always reflect the risk, "the gap is now closing."

"Clients with good loss histories and lower-risk technologies and locations are demanding that they be valued differently from those without those qualities," he said.

"For the latter clients, a wake-up time is coming," he predicted.