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.
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?