The marine insurance market has seen its fair share of rocky seas in recent months. Tensions in the Middle East have led some experts to predict that this “period of disorder and unrest” will lead to insurers and reinsurers either exiting marine insurance lines or adopting pricing models that will have negative effects on the end consumer.
More broadly, marine underwriting has seen pressure on profitability as of late, resulting in commercial marine markets, especially those in London, to react accordingly.
“Most insurers have clamped down on capacity and are taking a more cautious approach to underwriting,” said Patrick Barco (pictured), manager of ocean marine at Burns & Wilcox Canada. “They are reviewing and asking more questions, modelling CAT exposures, addressing adequate deductibles, and possibly looking at rating in different classes of cargo business.”
The hard market in this space has not come as a surprise to Barco because it’s long overdue. A soft market in commercial marine has prevailed for many years and now, a pile up of catastrophe losses from hurricanes, floods, and tornadoes has adversely affected the industry, especially in cargo and yacht.
“Insurers are now better equipped to obtain rate increases, even on clean accounts,” said Barco. “Most companies [are] increasing their rates so much so that brokers are forced to go into the market and look for terms that are compatible and agreeable with customers.”
ItCs not a buyer’s market anymore, he added, and insurers have the upper hand. Accounts that have had losses are paying nothing less than 20-30% in rate increases and upwards.
Amid these tough conditions, another more recent concern for the global marine markets is the coronavirus.
“Many shipping lines [are] not calling at [Chinese] ports because of the coronavirus,” said Barco, “[and] there have been delays in customers trying to get their goods on time because most of the factories in China have either closed or are working shorter hours.”
This has impacted several manufacturing industries, including the big automotive companies since China was one of the main countries from where they would import spare parts. Tied to this epidemic, losses could result if a vessel is calling at a Chinese port to discharge their cargo, but the manpower is missing, meaning that containers could be left for long periods of time. In turn, insurers would be paying big losses to cover the loss of the goods.
“I can see some of the losses arising from coronavirus and it’s only a matter of time before we see these claims trickling in,” noted Barco.
Nonetheless, Burns & Wilcox’s parent company H.W. Kaufman Group is equipped to handle the tough marine market, thanks to its strength in this line. Its companies include brokerage Lochain Patrick, which is focused on servicing the worldwide marine and energy markets, as well as Chesterfield Group London, which specializes in maritime among other lines, and RB Jones, which provides specialty risk coverage solutions for commercial marine accounts.
Combined with this expertise and “our marine capabilities in Canada and USA, we are in a position to deliver unparalleled service to our clients in this challenging marketplace,” said Barco.