Markel to “double down” on renewables despite recent challenges
A challenging period in the renewable energy sector has seen some capacity leave the market, but Markel International is as committed as ever, with divisional managing director of marine and energy Rohan Davies telling The Insurer TV the firm has “doubled down”.
“The easiest thing to do would be to step back and say: ‘Right, we're not going to do that anymore. We're gonna see what happens.’ We didn't do that. What we did is we invested and we doubled down,” he said.
The renewable energy insurance sector has faced a number of challenges, including rate inadequacy and a period of large losses. According to a report by WTW, last year saw more than 650 renewable energy insurance claims, with net incurred losses exceeding $ 843mn.
“The renewable energy space went through quite a challenging period of rate reductions and we really felt that coming through in our results,” he said.
The lack of rate adequacy was compounded further by Markel having “little control” of what kind of risk made up its renewable energy book.
“The renewable energy portfolio that we wrote for a number of years was MGA, or it was reinsurance. So we had no control over that,” Davies explained.
He explained that these two factors were the main drivers behind the carrier’s decision to step back and search for a “viable renewable insurance business model” to provide a more sustainable commitment to clients going forward.
Davies outlined that a major part of this new approach was taking its underwriting in-house, hiring a team of eight to do so.
“Those people came with a lot of years of experience, which I think is absolutely vital when you're going into a specialist class like renewable,” said Davies.
As a result of this approach, Davies said Markel has become “a leader in both the offshore and the onshore [renewable] space and that book continues to grow and we're really pleased with how that's going”.
Switch to midstream works out
As the conversation moved towards more traditional energy business, Davies noted how the market had been in an almost constant state of flux over the last 20 years.
Switching from “multi-billion dollar infrastructure development[s]” in the late noughties, to quick-turnaround shale projects, all the way through to the days of “$23-25 a barrel and the squeeze on our traditional exploration production”, Davies explained there was a lot to navigate.
In response to the shifting sands of the energy sector, Markel decided to focus on the midstream space.
It was a line in which Markel could offer “competitive products, at a price which made sense, which gave longevity to our client base”, according to Davies.
Markel also found the midstream sector appealing, as it helped balance some of the risks involved in working within the energy sector.
“We understood that marketplace well, so that we could see that their tariff-based income was different to the oil price-based income that a lot of our clients had. It became a natural hedge in our portfolio.”
As a result Markel has grown considerably in the space over the last decade.
“We grew it and we grew it considerably over those years to the point where it's now our second largest of our energy lines of business and we are a very significant leader on all of that business, where we lead over 60 percent of that portfolio,” said Davies
Watch the full interview with Markel International's divisional managing director of marine and energy Rohan Davies to discover more about:
- The marine rating environment
- Markel’s continued involvement in Ukraine
- Talent shortage in the insurance industry
- How the merger of marine and energy units at Markel went