American Oil and Gas Reporter - December 2015 - 76

page 76-83_Layout 1 12/2/2015 12:33 PM Page 76

AUTHOR: TB

SpecialReport: Insurance Update
Insurance Trends
ERIC BOQUIST
Travelers Oil & Gas

What are the defining trends in the
upstream insurance market as a tumultuous 2015 comes to a close? What are
your general expectations for 2016 with
respect to coverage availability in the oil
and gas industry? Are there any policy areas of concern that oil and gas companies
should be aware of?
BOQUIST: The oil patch landscape
has shifted greatly. With low oil and gas
prices, there has not been as much investment in drilling activity, which means the
exposure base has contracted. Payrolls are
down, numbers of hours worked are
down, and the number of wells drilled is
down.
The oil and gas industry is a dynamic

segment of the economy-technologies
are always developing and changing,
companies shift geographies to pursue new
opportunities, and commodity price swings
put pressure on companies to expand or
contract operations to meet fluctuating demand.
As the industry alters, coverage needs
may alter as well. The insurance industry
has become remarkably adaptive over the
years, and even more so in the oil and gas
space. We are confident that as energy
companies face new challenges, the insurance market will find ways to respond accordingly.

What can operators expect in regard
to insurance pricing in 2016? What types
of coverages are expected to see declining costs? Are there policy areas or specific coverages where costs are increasing? What factors outside the industry
could impact oil and gas insurance costs
and coverages in the year ahead?

BOQUIST: While the oil and gas insurance industry remains competitive,
the pricing environment appears to be stable. We believe each company we engage
with is unique in how it operates, and that
we serve each company best by taking a
risk-by-risk approach to rating insurance
costs. That means taking a granular view
of each line of coverage to adjust our thinking and approach according to each insured's risk characteristics.
One of the biggest factors outside the
industry that is impacting the oil and gas
insurance market is the increasing cost of
medical care. Healthcare costs make up a
major portion of the expenditures in the
U.S. economy, and they are projected to
grow from about 18 percent of gross domestic product to almost 20 percent in
2021.
This growth will be driven, in part, by
the aging population. Baby boomers are
getting older. More than 10,000 people are
expected to turn 65 each day over the next
19 years, and the percentage of the population eligible for Medicare is growing from
10 percent in 2010 to 20 percent in 2020.

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76 THE AMERICAN OIL & GAS REPORTER

American Oil and Gas Reporter - December 2015

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