High Energy Prices Drive Prospects for Oil and Gas Insurance Business
Jakarta (ANTARA) - Tugu Insurance President Director Adi Pramana said the rise in global energy prices is seen as not only increasing revenue in the oil and gas sector, but also driving growth in the energy insurance industry.
Adi said that when oil prices rise, upstream oil and gas companies’ revenue has the potential to increase because production output is sold at higher prices. This condition also raises the value of insured assets.
“If oil prices are high, the value of production and the value of shipments also increase. With larger insured values, the premium potential received by insurance companies also rises,” Adi said at an Energy Insurance Literacy event in Jakarta on Thursday.
He explained that the rise in oil prices makes the value of oil and gas cargo being shipped, for example by vessel, higher. As a result, the insured value also rises, so the premiums paid by clients increase as well.
However, according to Adi, this positive impact does not automatically boost insurance company profits because high energy prices also drive up transport and logistics costs, which ultimately trigger inflation.
“Rising inflation has the potential to make claim costs larger because the prices of goods, repair costs, and supporting services also increase,” he said.
For this reason, the company continues to control operational costs so that it still has room to anticipate an increase in claim values in the future.
Adi assessed that the performance of the energy insurance industry is influenced not only by the size of premiums, but also by the company’s ability to maintain a balance between premium income and claim payment obligations.
“We cannot immediately say that high oil prices automatically make performance better. Everything still depends on claims developments. The most important thing is to maintain a balance between insured assets and potential future liabilities,” he said.
Besides being influenced by oil prices, the prospects for the energy insurance business are also supported by rising investment in the oil and gas sector. Adi said a number of upstream oil and gas projects, especially in offshore areas, are expected to drive growth in the energy insurance business.
He estimated that the energy insurance business still has room to grow by around 18 percent as investment and oil and gas infrastructure development expand.
Currently, the energy business line contributes around 30 percent to Tugu Insurance’s business portfolio. According to Adi, the sector is one of the largest contributors because not many insurance companies have the financial capacity and international reinsurance networks to underwrite oil and gas project risks.
He added that, besides providing insurance protection, Tugu Insurance also acts as a risk management partner by helping oil and gas industry players carry out risk assessments and design loss prevention programmes.
According to him, this approach is becoming increasingly important amid rising national energy investment, which requires a strong risk mitigation system to maintain the sustainability of strategic projects.