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Upstream claims update: new pressures, familiar challenges

01 September, 2026

Large corporates

The upstream sector adjusts to a more uncertain world

Since our previous review, the upstream sector has entered a new phase. Demand for oil and gas remains robust, but investment behaviour continues to reflect caution rather than confidence. Geopolitical uncertainty, volatile commodity prices and persistent supply chain constraints have reinforced the industry's focus on capital discipline.

While Brent crude exceeded US$100 per barrel during periods of 2026, operators largely resisted the temptation to accelerate spending. Instead, many continued to prioritise operational efficiency, portfolio optimisation and shareholder returns over significant expansion programmes. This measured approach has become a defining characteristic of the market.

For insurers, the implications are clear. Existing assets are being operated for longer, often beyond their original investment horizons, increasing reliance on maintenance, inspection and integrity management programmes. As a result, machinery breakdown, equipment failure and associated business interruption exposures remain key drivers of upstream losses.

Supply chains remain a critical driver of claims severity

Although global logistics networks have stabilised compared with the immediate post-pandemic period, the upstream sector continues to face challenges securing specialised equipment and technical resources. Demand from major LNG developments, offshore projects and wider energy infrastructure programmes continues to compete for the same fabrication capacity, engineering expertise and critical components.

The consequence is that claim severity is increasingly driven not by the initial loss event, but by the time required to recover from it.

A failure involving a compressor, turbine or drilling package may be technically straightforward to repair. However, sourcing replacement components, securing specialist contractors and navigating congested supply chains can extend downtime significantly. In many cases, business interruption costs now exceed the value of the physical damage itself.

While operators have adapted to many of these challenges, recovery timelines remain vulnerable to external factors that sit outside their direct control.

Investment is concentrating around larger, more complex projects

One of the most notable developments over the past 12 months has been the concentration of capital into large-scale offshore and LNG developments. Investment activity has been strongest in deepwater provinces such as Guyana, Brazil and parts of West Africa, alongside major LNG expansion programmes in North America, Qatar and East Africa.

These projects offer attractive long-term production potential, but they also introduce a greater level of operational and contractual complexity.

The assets involved are typically highly specialised, globally sourced and supported by extensive contractor networks. A single incident can therefore trigger multiple areas of exposure, including property damage, control of well, delay in start-up and business interruption. The interconnected nature of these projects means that even relatively localised losses can have consequences across a much wider development schedule.

For claims professionals, understanding these dependencies early is becoming increasingly important in controlling loss escalation and supporting effective recovery strategies.

The human factor continues to matter

Technology, automation and digitalisation continue to reshape the industry, but people remain central to operational performance and loss prevention.

Many regions continue to face challenges attracting and retaining experienced personnel, while an ageing workforce is accelerating the transfer of critical knowledge across the sector. At the same time, increasingly sophisticated operations require a broader mix of technical and digital skills than ever before.

Claims investigations continue to demonstrate the importance of training, competency, contractor oversight and procedural compliance. While equipment failures often attract immediate attention, the underlying causes of significant losses frequently involve human and organisational factors.

Supporting customers through an evolving risk environment

Against this backdrop, the role of claims remains unchanged: helping customers recover quickly, safely and confidently following a loss. Today's upstream claims environment demands more than technical expertise alone. Success increasingly depends on early engagement, rapid technical assessment, close collaboration between insurers, brokers and adjusters, and a clear understanding of the operational challenges facing customers.

As the industry continues to navigate geopolitical uncertainty, supply chain pressures and an evolving investment landscape, one trend is becoming increasingly apparent: the largest costs associated with a loss are often generated after the incident occurs. In an environment where downtime can be more damaging than physical loss itself, effective claims management remains one of the industry's most important tools for preserving resilience and supporting business continuity.

References

Bloomberg 2026, US Oil Jobs Aren't Coming Back as Companies Become More Efficient, Bloomberg, viewed August 2026
Drilling Contractor 2025, 2025 NOV Rig Census Shows Global Drilling Industry Shift Toward Efficiency, Consolidation, Drilling Contractor
EY 2026, Straws in the Wind: Supply Chain Quarterly Update, EY
Offshore Magazine 2025, Trump Tariffs May Already Be Impacting the Offshore Oil and Gas Industry, Offshore Magazine
Stockton University 2025, Experts Discuss U.S. Shipping Law's Economic Impacts, Stockton University