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Survey Report

Insurance Marketplace Realities 2020 Spring update – Cargo

Marine
COVID 19 Coronavirus

May 7, 2020

The market continues to harden due to large claims, and capacity continues to shrink.
Rate predictions

 
Trend Range
Transit only
Good loss experience
Increase (Purple triangle pointing up) +10% to + 12.5%
Marginal to poor loss experience
Increase (Purple triangle pointing up) +12.5% to +20% and higher
Stock throughputs
Good loss experience
Increase (Purple triangle pointing up) +12.5% to + 20%
Marginal to poor loss experience
Increase (Purple triangle pointing up) +20% to +40% and higher

Key takeaway

The market continues to harden due to large claims, and capacity continues to shrink. Starting renewals early is critical, especially for stock throughput programs and higher risk industries. Detailed renewal data is also critical and is impacting terms, conditions and price.

In conjunction with increased rates, markets are also seeking higher retentions.

  • Rate increases vary with loss experience. Retention levels are being assessed on a case-by-case basis.
  • Accounts with catastrophe-exposed storage risks and/or in certain industries segments are seeing higher rate increases. Retention levels on this business are usually going up as well.
  • Accounts with poor loss history may see significant rate increases in addition to severe retention increases and, in certain instances, they may see more restrictive coverage terms.
  • When marketing profitable business, however, we are still securing competitive terms, but virtually no buyers are seeing reductions in price unless they had a multi-year deal in place and the loss experience remains good.
  • Capacity is shrinking and is being more carefully deployed.
  • The already limited U.S. market capacity for excess stock has further eroded.
  • Quota sharing risks in many instances has become necessary, especially for catastrophe-exposed storage risks.
  • Terms and conditions for industry segments such as pharma/life science, food/beverage, automobiles and stock throughputs with retail store exposures are being reviewed carefully.
  • Insurers are revisiting their underwriting strategy, risk appetite and underwriting guidelines as they look to return to profitable underwriting.
  • Detailed underwriting information is critical.

Broad manuscript policy terms are still achievable, but underwriting will focus on several factors:

  • Catastrophic risk for goods in storage
  • Broad wording for spoilage, deterioration and decay
  • Broad control of damaged goods cover, including fear of loss
  • Coverage for voyage frustration
  • Policy deductible clauses
  • Catastrophic peril definitions
  • Packing on high-tech machinery and equipment, as well as pharmaceutical and life science products
  • Security on high theft-risk commodities, such as apparel and accessories, food and beverage commodities and pharmaceuticals
  • Review of logistics contract wording
  • Coronavirus and possible effects on policy terms

Insurance buyers should be ready for change.

  • Most markets have adopted or are in the process of adopting cyber exclusions on marine policies.
  • The economic slowdown may have an impact on this insurance marketplace.

Disclaimer

Each applicable policy of insurance must be reviewed to determine the extent, if any, of coverage for COVID-19. Coverage may vary depending on the jurisdiction and circumstances. For global client programs it is critical to consider all local operations and how policies may or may not include COVID-19 coverage. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal and/or other professional advisors. Some of the information in this publication may be compiled by third party sources we consider to be reliable, however we do not guarantee and are not responsible for the accuracy of such information. We assume no duty in contract, tort, or otherwise in connection with this publication and expressly disclaim, to the fullest extent permitted by law, any liability in connection with this publication. Willis Towers Watson offers insurance-related services through its appropriately licensed entities in each jurisdiction in which it operates. COVID-19 is a rapidly evolving situation and changes are occurring frequently. Willis Towers Watson does not undertake to update the information included herein after the date of publication. Accordingly, readers should be aware that certain content may have changed since the date of this publication. Please reach out to the author or your Willis Towers Watson contact for more information.

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