Changes in energy import/export patterns
This article is from our archive (2014). Regulation and market conditions may have changed since it was written.
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.
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?
