The International Union of Marine Insurance (IUMI) released a report, alongside its expert opinion, on the current state of the hull, cargo and offshore energy insurance markets, during its Spring Conference in Hamburg.
According to IUMI, the past three years have seen the frequency of total losses within the global fleet stabilize at 0.13% by number (0.05% by tonnage). This is largely attributable to an improved safety climate, improvements in naval architecture and marine engineering; and more effective regulation.
“All hull markets acknowledge the severe volatility inherent in a typical international hull portfolio,” IUMI Ocean Hull Committee chair Mark Edmondson said. “Although the financial impact of major casualties was modest recently, increasing values of single risks bear the potential risk of new record losses, and attritional losses are a growing concern.”
IUMI also expressed its concern about advances in digital applications involved with naval architecture and the operation of vessels. There is evidence that the frequency of collisions is increasing, possibly resulting from the introduction of modern technology, it said.
With an abundance of capacity, IUMI said the marine cargo insurance market is improving and stabilizing but remains highly competitive.
IUMI outlined the many challenges facing the line, which include:
- Larger and more complex risks;
- Natural catastrophes (NAT CAT);
- Vessel and port accumulations;
- Larger outlier losses;
- Commoditisation of speciality lines;
- Increase in broker facilities with high commissions and rising expense ratios;
- Underwriters’ incompliance with sanctions and requirements;
- Cyber risk.
IUMI Cargo Committee chair Sean Dalton, meanwhile, said cargo underwriters are being stretched to evolve and improve cargo insurance policies.
“As underwriters, we are being challenged to improve our approach and utilize tools such as third-party data, sensor technology and predictive analytics,” he said.
“Cyber is also a concern,” he noted. “Most policies remain silent on cyber issues, but the recent Maersk NotPetya attack highlights potential exposures and consequences. Policies that raise the greatest potential risks include Freight Forward Liability covers such as NVOCC Legal Liability, Indirect Air Carrier Liability and Errors and Omissions.”
IUMI also said 2017 saw the worst natural catastrophe losses in history for the property and casualty (P&C) insurance sector – these were caused by hurricanes Harvey, Irma, Nate and Maria, the earthquake in Mexico, monsoons in Bangladesh, storms in Durban and wildfires in California.
Additionally, a 25% increase in the oil price saw an upturn in offshore exploration activity, which is starting to impact positively on the offshore energy insurance sector.
“Attritional losses continued to track at a low rate due to reduced activity and improved health and safety practices,” it added. “But this might reverse as rigs are reactivated.”