A senior marine underwriter has warned brokers about an emerging risk within the market, saying it has the potential to be “game changing” for the sector.
Speaking to Insurance Business, Christopher Collins – underwriting manager at SURA Marine – pointed to cargo losses resulting from cyber related fraud in freight documentation as a major concern.
“It’s a new component to consider under existing marine insurance arrangements,” he said. “Speculation about blockchain technology becoming the norm for supply chain and logistics is premature in my view, with any significant uptake in this area being decades away.”
In addition to the imminent threat posed by cyber related fraud, Collins also said there’s another risk in the market which regularly goes overlooked by insureds.
“Cargo owners are often unaware that transport companies, including air, sea and road carriers, are entitled to limit their liability for cargo loss or have their liability limited by international laws and conventions,” he said. “This can often lead to cargo owners being out of pocket if they rely on transport service providers for compensation.”
However, Collins did note that there’s been a shift toward cargo owners placing full responsibility for loss and damage on road carriers which has led to cargo owners foregoing their own cover or adopting higher deductibles.
“In the past, road carriers have been able to contract out of claims against them even when they may have been negligent,” said Collins. “However, recent changes to the Unfair Contracts Law could make this practice more difficult when dealing with small businesses.”
Interestingly, Collins also commented on an apparent concern he’d observed from brokers, saying an increasing number had expressed worries over a lack of skilled underwriters in the space.
“More underwriting services shifting online has increased the difficulty in finding skilled underwriters for any risks that sit outside the box,” he said.
“Despite the convenience of self-service options, having easy personal access to underwriters is still highly valued and brokers who harness those direct relationships will have a real advantage over their competitors,” he added.
Despite the apparent challenges, Collins said he remains both upbeat and optimistic about the current nature of Australia’s marine market.
“Conditions in the cargo space remain competitive with plenty of underwriting capacity, despite some signs of risk remediation in the market,” he said.
“Carriers load risks currently account for a disproportionally higher percentage of claims costs in the market, this will make it more difficult for poorer performing risks to find cover and competitive pricing than in previous years.”
Collins also noted that capacity restrictions in commercial hull risks have increased in the past 18 months, a trend which he predicted will likely continue in the medium term.