Global marine insurance premiums reached US$28.5 billion in 2017, up 2% from 2016, according to an annual statistical report from the International Union of Marine Insurance (IUMI).
However, IUMI warned that it is not all smooth sailing for the industry. According to the insurance association, there is a growing mismatch between premium income, covered risk, and claims costs.
The report, which was presented during IUMI’s annual conference in Cape Town, South Africa, detailed that despite the slight uptick in premium income, the environment remains challenging for marine underwriting.
According to Astrid Seltmann, vice chairperson of IUMI’s facts and figures committee, the hull market has been affected by falling vessel values and other market conditions that contributed to an erosion of income to a degree where income is now not sufficient to allow for normal repair costs in a given year.
“This downward trend is particularly worrying given the relative absence of major hull losses in recent years,” Seltmann said. “The last 10 years’ statistics clearly show an increasing volatility in the impact of claims on underwriting results caused by the random occurrence of claims with unprecedented cost. As vessel sizes continue to increase, this trend will not reverse, and the heightened risk must be taken into account.”
The cargo market has been rocked by unprecedented nat-cat and outlier event losses and these have negatively impacted underwriting results. It also signals an increasing, and often unknown, accumulation of values both on shore and at sea.
Meanwhile, the offshore energy market has also seen a substantial erosion of premium income caused by low oil prices, resulting in low activity in the offshore sector. However, insurance capacity remains abundant.
“More positively, the 2017 hurricane season had little effect, and major claims impact remained low,” Seltmann said. “It remains to be seen when and to what degree the rising oil price will support an upswing in this sector.”
Geographically, the distribution of premium income remained stable, with a mere 1% increase in the share of Asia and Latin America as compared with Europe. In 2017, Europe represented 49% of global income, while Asia-Pacific accounted for 29%. Latin America brought in 10%, followed by North America (6%), the Middle East (4%), and Africa (2.4%).
“In general, the IUMI statistics clearly illustrate the need for sustainable underwriting by understanding the simple – and sometimes not so simple – mathematics of evaluating the risks and expected costs associated with a prudent marine portfolio,” Seltmann said.