There’s no doubt that both the energy and insurance industries are facing challenging times. Low oil prices are driving cost-cutting and workforce layoffs, at a time when the insurance markets are beset by over-capacity and a dwindling premium income base. But times are about to become even tougher for both industries, according to an experienced financial journalist.
Speaking at our European Energy Conference in Bedfordshire on June 7, London Evening Standard City Editor Anthony Hilton outlined a dramatically changing business landscape. Citing the examples of Uber, which owns no cars, Facebook, which creates no content and Amazon, which owns no stores, he emphasised that the tech revolution is changing the ways in which companies are doing business. “In five years’ time, 25% of existing business models will be obsolete” he claimed. “Organisational resilience is now more fragile than ever”.
Hilton pointed to the growth of intangible assets in the energy industry, such as goodwill, reputation, intellectual property, supply chain resilience and employee knowledge, and contrasted their growth with the decline of tangible assets such as oil rigs, refineries and power stations. In general terms, he asserted that the risks associated with intangible assets are not being managed or transferred effectively.
The insurance industry, warned Hilton, is therefore in danger of losing its relevance to the energy industry at a time when energy insurers need all the premium revenue they can get.
So is it all bad news for insurers, as Hilton suggests? Maybe not. Even Uber drivers need basic first- and third-party insurance during times when they’re not employed to transport Uber passengers (this may even mean more insurance products being bought, not less). And while the ownership structure may be changing, the Natural Resources industries still own a vast range of valuable physical infrastructure, the majority of which will continue to require risk transfer protection. There’s no doubt that effective insurance cover has proved its value to our client base in the past and will doubtless do so again.
Later during the conference we put the energy industry delegates to the test. When we suggested, that “the insurance industry will continue to provide significant value to European energy companies in the years ahead”, 87% agreed (see image above).
Maybe the Armageddon scenario for energy insurers is still some way off after all.
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