Changes in energy import/export patterns

There is a new paradigm evolving in energy requirements which will has potentially huge structural implications across several industries. This is illustrated in the graph below.

The World Bank – World Development Indicators

Source: The World Bank – World Development Indicators

We think insurance will be affected in several ways, here are just a few possible consequences:

  • Acceleration in US economic recovery and resulting consequences of interest rate normalisation on insurer balance sheets
  • Increased supply-chain / CBI risks for countries like UK and Japan with increasing import dependency
  • Increased US pollution aggregate exposure from fracking activity
  • Water competition between agriculture and fracking operations resulting in changing nature of agriculture risks
  • Changing balance of energy supply and demand will flow through to insured asset valuations
  • Shift in operations from mega-risks back towards larger numbers of smaller units

How should this be factored into an insurance organisations business plans? Should this be treated by firms as an emerging risk?

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