The Summit

Beacon Hill Associates A publication of Beacon Hill Associates

A Year in Review: South Central Region

Taking a look at challenges and opportunities from last year and a forecast for 2019 in the South Central region of the country.

2018 was a year of continued development and problem solving for those of us in the South Central Region of the country. For Beacon Hill, the South Central region consists of Texas, Oklahoma, Louisiana, Kansas, and Arkansas. A majority of our business comes from Texas, Oklahoma, and Louisiana. Considering the type of industry most prevalent in those states, it’s no surprise that a vast majority of the type of accounts we see are in some way related to the oil & gas sector.

As we were reviewing 2018 we found that roughly 50% of all submissions received by the South Central region were related to coverage for facilities, servicing, manufacturing, distributing, and transportation within the energy arena. As we drill down further we found that a majority of those submissions were specific to the servicing operations found around well sites. These contractors are commonly referred to as roustabout contractors and can include services ranging from pad site improvement and beautification to flow line contractors and anything in between. Most of these servicing operations tend to be smaller in size as O&G companies prefer to hire from contracting companies to handle specific projects in order to keep from having to constantly turn over their own employees due to the economic volatility that exists in the O&G field.

From a premium standpoint, the largest revenue generating class that we saw in 2018 was from refinery contractors. We saw roughly 25% of all new business premiums for 2018 written with this class alone. The question we often get about this class is: “how do you define a refinery contractor?” We define a refinery contractor as someone who does any work in a refinery—that’s it. So, an electrician who does work in refineries, that’s a refinery contractor. Since these insureds can be considered refinery contractors, it enables us to get them the coverages they are going to be required by Master Service Agreement to carry in order to enter a refinery.

The remainder of what we saw can be roughly broken down to 20% standalone Contractors Pollution Liability or Contractors Pollution with Professional requests on non-environmental contractors such as electricians, street/road, and HVAC contractors. The remaining 30% of submissions were from typical environmental risks such as fire/water restoration contractors, remediation (soil, mold, asbestos) contractors, service station/tank contractors, and environmental consultants as well as from industrial/site risks including chemical manufacturers, disposal, and recycling facilities.

One of the biggest coverage challenges faced in our region for 2018 was Auto coverage. This coverage is particularly difficult in Texas and Louisiana as we continue to see rates climb and carriers becoming more selective. One class that is specifically difficult to write is salt or brine water hauling. Due to the high loss ratio this class tends to carry with it, most carriers are unwilling to entertain risks involving salt water hauling. Fortunately we have a few markets that will provide Auto Liability for this class and we even have some markets capable of giving both liability and physical damage at competitive rates.

We are very optimistic about 2019 as we continue to see growth in areas like the Permian Basin, where most crude product in our region is being extracted. With continued extraction comes a growing need for storage and transportation as well as refinement of the product and all of the supporting industry that goes along with it. Combining our experience and the strategic relationships we have developed in both the Environmental and Energy underwriting side of our industry, we are more than well equipped to handle the most difficult accounts that an agency might come across this year.

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