While more risks exist in the energy industry than ever before and challenges to underwriters have never been as great, opportunities still abound for insurers willing to do their due diligence in a market that is constantly evolving.

Which is not to say that insuring clients in the energy market is without its perils; clients in some sectors are facing greater exposures than they've seen in years. It doesn't help that oil hit a 12-year low earlier this year, when the price per barrel fell below $27: An oversupply of oil translates to lower prices per barrel, which in turn means that energy companies can't afford to make upgrades to their assets.

Billion-dollar losses

Many of those companies affected by the downturn have deferred asset maintenance and upgrades over the past several years, says Pascal Ray, senior vice president, marine and energy programs manager at USI Insurance Services in Houston. That has resulted in a rush of claims that approach and even top billion-dollar losses.

During the 2015–2016 Los Angeles Aliso Canyon gas leak (also referred to as the Porter Ranch gas blowout), for example, an estimated 97,100 metric tons of methane and 7,300 metric tons of ethane were released into the atmosphere, making it the worst single natural gas leak in U.S. history. Losses to SoCal Gas are at $700 million and rising. According to reports, the source of the leak was a decades-old metal pipe some 8,750 feet below ground level that had not been considered a danger.

Wave of claims in near future

Ray predicts that the energy industry will see a wave of claims in the near future because of deferred and delayed maintenance, upgrades and integrity testing of a company's crucial assets of wells, pipelines and refineries. “The downturn in the [oil] industry has forced cutbacks in maintenance and asset integrity testing, which is most likely going to manifest itself in asset integrity-related claims,” he says.