Evolving Landscape: Changes in Control of Well Policies

The Control of Well insurance market, which provides vital coverage for well control incidents in the upstream oil and gas industry, is a dynamic space that experiences continuous flux.

Insurers enter and exit the market, driven by various factors such as risk exposure, pricing strategies, and industry dynamics. While describing it as chaotic may be an overstatement, the Control of Well insurance market is undoubtedly marked by constant change and adaptation.

One of the reasons behind the fluctuating nature of the Control of Well market is the delicate balance between risk and pricing. From time to time, some insurers enter this space (“new capacity” as we say in insurance speak), enticed by the potential premiums in this specialized sector and enter the market aggressively, often by underpricing their policies. This approach can attract clients initially, but if claims surpass their expectations, it can quickly lead to financial strain or even insolvency of the insurer. Consequently, insurers may exit the market or adjust their pricing strategies to mitigate losses.

We have seen this happen recently. What seemed like a promising (and attractively priced) program is now gone. Insureds are left scrambling to find a replacement.

At Novation, we would like to help you avoid being subjected to that sort of whiplash.

The oil and gas industry itself is inherently volatile, with well control incidents having the potential for significant financial losses. Blowouts, well kicks, and other incidents can lead to catastrophic consequences, including environmental damage, property destruction, and human safety hazards.

Operators need insurance to mitigate this risk and insurers need to carefully assess and manage these pooled risks, in exchange for premium. That’s how insurance works, and when done properly, everyone wins.

For oil and gas producers seeking Control of Well coverage, it is crucial to navigate this dynamic market effectively. Engaging with an experienced insurance broker or risk manager becomes even more critical.

At Novation, we can provide you with guidance to navigate this continually shifting landscape. We can help you understand the financial stability and reputation of insurers, and we can help you find secure coverage from reliable and established market players who are equipped to provide stability and continuity in coverage – thus allowing you to focus on growing and sustaining your business.

Please DM me if you would like to discuss your Control of Well insurance needs.