Despite its far-reaching consequences, the Gulf of Mexico disaster is likely to result in only “modest” rate hikes in the upstream energy insurance market.

Global insurance broker Marsh says while the Deepwater Horizon catastrophe has unsettled insurers, it hasn’t resulted in the massive capacity reductions that drove upstream energy insurance rates up following other disasters like Hurricane Katrina.

Instead, capacity remains healthy and price rises are likely to be “modest” in other parts of the upstream energy market, provided further major losses don’t occur to drive up reinsurance prices.

Marsh Global Energy Practice Chairman Jim Pierce says the Gulf of Mexico disaster has “undoubtedly changed sentiment” among upstream energy underwriters, but isn’t a market changer.

“As a result of the incident, many firms involved in offshore activities are reviewing their current insurance programs and are seeking to top up their cover,” he said. “Some insurers have been capitalising on their clients’ concerns and have been hiking up their prices for higher limits and deepwater drilling wells, regardless of where they are located.

“The Transocean loss is an important event in the history of deepwater drilling and exploration insurance but not a market changer.

“Following Hurricane Katrina, there was a massive change in the insurance landscape due to a lack of capacity and changes to the way in which wind insurance was sold.

“Capacity currently isn’t an issue and insurers seem keen to maintain their commitment to the market. This is good news for the industry.”