"With [Hurricane] Maria, the consensus is that the total insured losses will exceed $100 billion," Somerville says. "There has been a significant impact on refinery production, and several major (re)insurers are already purchasing additional top-up reinsurance protection."

He believes the final bill to the energy insurance market may not be severe, as insurance claims will only be recoverable from policies that have been specifically endorsed to cover named windstorms. "History suggests hurricanes are likely to be seized on as a rationale to increase prices," he explains, "and we fully anticipate some type of market correction after insurers have a chance to estimate their ultimate losses."

"In addition to hurricane losses, a new concern is the proliferation of wildfire losses," points out Jerry Wosleger, senior vice president of NavTech, Navigators' global business that underwrites energy and engineering/construction and other technical industrial-related risks. As wildfires continue to become more extreme, he expects to see more claims and losses from clients in affected areas.

Related: Top 10 ZIP codes for fire loss

Emerging opportunities energize the market

Despite the losses from hurricanes and other natural disasters, "the abundance of reinsurance market capital — the driving dynamic behind market conditions now for nearly a decade — is likely to remain dedicated to the industry, regardless of what individual sector loss records produce," says Somerville."Reinsurance treaty prices will likely rise in the short term. However, as long as capital continues to flood the market, not much is likely to change in the long run."

Related: 10 U.S. cities with the highest & lowest natural-disaster risk level

Insurers agree that the Energy market is ripe for investment. In 2016, The Hartford launched a dedicated energy practice to provide specialized underwriting, insurance coverage and risk management services for energy companies.

"We feel this is the right time to invest in the energy sector, as we continue our focus on broadening and deepening our commercial insurance expertise and capabilities to serve key industry sectors," says Ric Pena, head of Energy for The Hartford.

Pena's clients continue to expand and build new pipelines and midstream facilities, and they continue to invest in the extraction of oil and natural gas. Rig counts are up and so are employee counts. "On the Power-Gen side, new plants are being built, and existing plants are being converted to cleaner natural gas-powered facilities," he adds. All this presents opportunities in both the construction and operational risk arenas.

Beyond oil and gas, Pena is seeing continued investment in traditional and green energy, noting that energy market clients are seeking providers that understand their businesses, partner with them, and help them manage their total cost of risk. "We are seeing opportunities with emerging companies in the energy space backed by private equity. As newer ventures, these companies need partner carriers who are open to working with them during the initial phases of their journey," he points out.

It's clear that renewable energy will present growing opportunities for insurers. (Photo: National Underwriter Property & Casualty)

"The renewable energy business is continuing to grow in North America and globally," says David Barclay, senior vice president of Chubb's Energy Resources Practice. "Many states and provinces are encouraging solar and wind projects through various incentives."

The ability to store power economically until it is needed will be the real game-changer for solar and wind energy. However, storage technology is still emerging and presents hazards such as breakdown and fire, he adds.

Barclay predicts that renewable energy will continue to grow as technology improves, in turn enhancing the renewables sector's ability to compete with traditional power generation. He points out that the renewable energy space is growing not only for power providers but for manufacturers of renewable energy products.

At the same time, Barclay acknowledges that although renewable energy is growing, traditional energy still makes up the largest portion of the energy market for insurers. Oil and gas operators are seeing a steady upturn from 2015 with improved oil prices. Metal mining and oil and gas companies have trimmed expenses and are better poised to operate profitably. Additionally, with the proliferation of shale gas many power generators are converting their fleets from coal to natural gas with confidence that it will be a sustainable, economical fuel for many years. "This pivot to natural gas will also spur growth for midstream gas pipelines and ancillary operations," he notes.

Related: Solar spotlight: New opportunities in renewable energy

It's worth noting, Barclay adds, that traditional and renewable energy are coming together for many insureds. As an example, mining companies with remote locations have traditionally generated power via portable diesel generation. He is now seeing mines use wind or solar to support their power needs.

Improved terms and conditions

Mike Newman, principal at Integro Insurance Brokers, points out that because the market is so soft, there's an opportunity for insurance buyers to negotiate improvement in terms and conditions.

According to Barclay, terms and conditions "have loosened, to a degree." He points out that most long-term energy insurance providers recognize the severe nature of the business and are changing the corresponding strict terms and conditions cautiously, based on the quality of the risk.

Although renewable energy is growing, traditional energy still makes up the largest portion of the energy market for insurers. (Photo: National Underwriter Property & Casualty)

Newer energy technologies pose unique challenges because there simply isn't the same amount of historical loss data.

"Underwriters have to meet this challenge with an intense underwriting process to help determine adequate pricing," Barclay stresses.

He offers wind turbines as one example. They've been around for many years and have become more dependable and efficient — but they've also become larger in size, causing replacement costs to increase. "A fire loss to the equipment in the nacelle is substantially greater than it was a few years ago," he points out. In addition, finding a crane of adequate size to repair the damage is difficult, possibly resulting in longer rebuilding time and higher claim costs, including those losses associated with business interruption.

Related: Exposures are 'greater than ever,' but opportunity remains in energy insurance

Keys to success

How can agents and brokers compete effectively in the intricate, challenging, and rapidly evolving Energy market?

Barclay believes that the producers that succeed in the energy space are those that are dedicated to deep knowledge of the industry, noting that the industry is complex and can change quickly.

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"An agent or broker that is committed to understanding their client base will prevail," he says. He also believes that it's vital to engage with carriers that have deep subject matter expertise across the underwriting, risk engineering and claims ranks and are equally committed to the energy space for the long term.