Executive Interview

Interview with Ryan Mansom, Head of Energy Pacific, Gallagher

Published 23 May 2024

Ryan Mansom
What key trends do you see shaping the energy landscape across the Asia Pacific region over the next five years, and how is Gallagher positioning itself to address these changes?

The energy industry represents a very broad spectrum of services, from upstream exploration through to energy production, all whilst leading the world into the transition of securing reliable alternative sources of energy. This will all lead to a lot of activity over the next five years. Some of the key trends I expect to see over the next five years are:

1. Continued Divestment of mid-life assets by majors: we are seeing the larger E&P companies in particular seeking to sell off their interests in mid-life assets for a multitude of reasons. This could be as it is no longer seen as a key asset to continue to invest in or they may be seeking to commercially move away from these assets, therefore potentially releasing them of decommissioning obligations.

2. M&A: the world is sending a demand for increased energy production set against the backdrop of the instability of the geopolitical environment. This is having direct impact on supply chains and spurring greater intensity around regulatory obligations, factors which are affecting all companies and contributing to driving entities towards greater M&A activity.

3. Private Equity investment: a positive indicator of our industry is the increased investment by private equity. As the industry continues to prove its strong value to global economics we would envisage that this line of investment will continue as the requirement for energy by the world’s population increases. This investment by PE can only help the industry strengthen.

4. Decommissioning activity increasing: with each year of age we are seeing fields drawing closer to end of life and with that comes the requirement for decommissioning, both onshore and offshore. In our region it is likely this activity will continue.

5. Company’s transitioning: already we are seeing many companies’ seeking to transition away from traditional forms of energy production to options which offer alternative, greener fuel sources. We consider these companies critical as they provide the balance between offering an immediate solution to the energy needs of the region, whilst also seeking a path of longevity into the new greener world.
6. Progression of alternate energy paths: the last decade has seen the focus on alternative solutions to create and store energy moving away from solar and wind energy only. We have evolved in our understanding of how better to utilise our geographical landscape and we are seeing the push across various countries towards areas such as offshore wind, decarbonising existing projects, reinventing existing assets for alternative purpose use, eg: wells into CCs.

Gallagher is very conscious of the industry movements and continues to meet the needs of these changes with ongoing global investment resources which assist and add value to our clients. This has seen our energy specialty services expand in recent years, with the promise of there being more to come. Gallagher is constantly reviewing our global spread of resources and will expand to meet any ongoing requirements. Further, Gallagher seeks to expand in offering other specialised services which complement our broking arm. Among others these include:

  • Expansion of our M&A team to assist a company through the various stages of a merger and acquisition, offering the likes of warranty and indemnity insurance to directly protect the company’s interests against warranties made through the sales process, and the ability to issue necessary documentation including reliance letters upon completion.
  • Gallagher has most recently advanced our offering in the arena of sustainability, which affects all companies in the energy sector. Our specialists in this sector work with brokers to identify current and future risks in ever changing world and, importantly, illustrate the value of investment to address this risk.

 

Given the increased focus on sustainability and renewable energy initiatives in the region, how is Gallagher supporting clients on their transition journey?

Whilst Gallagher was established over 97 years ago as an insurance broking business, we have continued to evolve in our approach and the array of services we can offer to our clients. Our clients are more actively exposed to ESG risks which are now extending to influence regulatory obligations. Gallagher has progressed our position by taking deliberate steps to strengthen our offering to the industry. The services we are able to offer to assist in this process are unparalleled and include:

  • Unique sustainability risk assessment: Gallagher offers a sustainability risk assessment service designed for organisations of all sizes to help them navigate the complexities of sustainability, including supply chain practices and stakeholder relationships.
  • Beyond ESG scores: We go beyond traditional risk management approaches and simple ESG scores. Our sustainability risk assessment provides valuable insights for informed decision-making in relevant risk mitigation strategies.
  • Risk identification and mitigation: A Gallagher sustainability risk assessment helps identify and explain potential sustainability-related risks that could impact your operations. Proactive risk mitigation reduces the likelihood of incidents and losses, resulting in more cost-effective insurance premiums.
  • Insurance and finance cost reduction: Demonstrating strong sustainability risk practices can lead to lower finance costs and improved terms. Insurers may offer discounts or risk management credits to businesses with robust ESG management systems.
  • Compliance: Gallagher’s sustainability risk assessment ensures compliance with environmental and social regulations, reducing the risk of legal liabilities and associated insurance claims. Our assessment aligns with standards such as the Sustainability Accounting Standards Board (SASB), International Sustainability Standards Board (ISSB), Task Force of Climate-Related Financial Disclosures (TCFD), World Economic Forum ESG Metrics, and Global Reporting Initiative (GRI).
  • Insurance review: We review your sustainability (ESG and climate change) activities and risks, advising on how your current insurance policies would respond in a claim situation. We emphasise transparency and accountability in your sustainability approach and can guide you on tailoring coverage for specific sustainability exposures.
  • Access to global expertise: Gallagher has access to world-leading natural catastrophe loss modelling and research capabilities through the Gallagher Research Network.
  • Beyond the E: Gallagher helps you look at sustainability beyond the environmental (E) pillar of ESG. We focus on specific risk issues material to your organisation, including data protection, health and safety, supply chain, and governance risks.

As trusted pioneers in the insurance industry, Gallagher understands risk exposures and the breadth of assessments required. We understand the rising expectations, risks and opportunities tied to sustainability (ESG and climate change) factors.

With our sustainability risk assessment, Gallagher provides a comprehensive analysis on the possible impacts on finances, operations and reputation. This will help you to assess your operations and strategies for improving governance, employee relations and environmental standards. Our sustainability risk assessment can be used across the business beyond insurance.

Can you elaborate on Gallagher's approach to risk management and insurance solutions tailored specifically for the diverse needs of energy companies?

Risk Management is a discipline that Gallagher has continued to refine through our years of operations and involvement in the energy sector. Working closely with clients, we seek to understand and differentiate all components of risk that will affect the company, be it physical, contractual, legal/regulatory, or financial.

Gallagher then works with the company to determine how best they wish to manage risk. Do they want to transfer the risk by way of an insurance product or contractually, or can they take on the risk under their own financial balance sheet? Our approach ensures that whether the client transfers or retains risk, they do it knowingly and with the understanding of its effect to their balance sheet.

From an insurance perspective, again we are dealing in a dynamic industry which is constantly evolving with new technologies and processes for creating energy. This is mirrored by insurers, with whom Gallagher works constantly to create alternative solutions for the industry and clients. Whilst some solutions may be more conventional, others may involve a hybrid of products.

How important is collaboration between companies such as yourselves and energy companies, as the industry works through a just energy transition while balancing energy security and affordability pressures?

The collaboration between risk management/insurance broking and energy companies is critical for a myriad of reasons. We operate in a sector that uses ever progressing technology and advances in ways and sources to produce energy to stay in front of the world’s needs, and it is critical to ensure a company is protected against associated risks to these advancements in order to enable them and the industry to continue developing.

When determining the risk for any asset it’s essential to understand and consider the company’s exposure across all key areas of legal, financial, regulatory, contractual and physical risks, as well as the social impact it presents.
The ongoing advances present an ever-changing risk landscape, which a company and the industry as a whole need to consider in order to protect their financial balance sheets, as impacts on the balance sheet could prohibit them from continuing to progress with the identification and creation of alternative energy sources.

Working through a schedule of identified risks, a specialist broker offers experience and understanding of the energy industry, and of the insurance market providers offering capacity to this sector, to deliver advice on accessing and transferring risks to an insurer via insurance policy coverages or otherwise deciding which may be retained inhouse.

Solutions may be through traditional insurance mechanisms, adjustment of existing insurance products to cover specific needs, consideration of alternative risk transfer solutions, or a combination of these. The key for any energy business is having clear understanding of their total cost of risk, which is the risk coverage they are outlaying, plus what is being retained, or ‘self-insured’, and the costs of both.

Another critical factor in renewable energy financial risks is regarding any obligations imposed by the financial institutions involved, such as lender requirements for risk coverage in certain areas, which often has a direct bearing on the insurance the business must have. Gallagher has significant experience in dealing with financial institutions, in identifying risk, placement and providing the appropriate documentation including letters of reliance to these institutions.

 

As energy companies adopt technologies such as AI and IoT, how does Gallagher assist clients in assessing and managing emerging risks associated with such digital transformation initiatives?

With the dynamic and fast-paced changes to the technology climate Gallagher has evolved its approach to assist managing our clients’ risks with AI, and we are committed to educating our clients to potential cyber threats to their businesses and helping them develop robust risk mitigations and proactive technology protocols.

AI has begun to challenge the status quo, simplifying our clients’ day to day workloads in a fast-tracked environment and we endeavour to continue our proactive approach with leading experts in the field. Within the energy and resources industry as a whole we are seeing more advances in remote technologies, with production facilities now operated remotely, with attendant concerns over potential hacking and loss of control. Gallagher works closely with clients to understand the separation mechanisms in place to ensure that if the integrity of one system is affected by a third party there is the ability to ensure other business systems will not be compromised.

Whilst the landscape continues to evolve, Gallagher has a wealth of resources such as informative webinars with incident response teams, underwriters and clients who themselves have suffered an incident.

What are you most looking forward to at the Energy Council’s APAC Energy Capital Assembly 2024?

The APAC Energy Capital Assembly provides a fantastic opportunity and platform to catch up with a number of our clients and friends over a few days in Singapore. The networking opportunities also enable us to meet new like-minded people who are interested in supporting and providing the region with energy solutions.

What really stood out, however, with the assembly over other conferences is the topics being spoken about. In particular a few key areas I look forward to hearing about are around the M&A activity, which as discussed above I feel will be a prevalent factor in the industry over the next five to 10 years, and in particular what role Private Equity will play in this moving forward and how the regulatory bodies of different counties will respond to such changes.

I think one of the key areas that is really going to shape our industry and the world as a whole is the geopolitical environment. We are seeing a number of issues playing out at present, particularly in our region, and what direct and indirect effect this may have on for future development.

Finally, I’m watching the impact the transition movement is having and will have on traditional E&P companies, as I feel that companies such as Gallagher can really contribute to assisting with this process.

Asia Pacific Energy Capital Assembly

Returning to Singapore in June 2024

The APAC Energy Capital Assembly is one of Asia-Pacific’s largest and most influential energy investment events.

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