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Survey Report

Insurance Marketplace Realities 2021 Spring Update – Marine cargo

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April 21, 2021

Market fluctuation around pricing is starting to subside and become more predictable.
Rate predictions
  Trend Range
Transit only (U.S.)
Good loss experience: Increase (Purple triangle pointing up) +10% to +15%
Marginal to poor loss experience: Increase (Purple triangle pointing up) +15% to +20% and higher
Stock throughputs (U.S.)
Good loss experience: Increase (Purple triangle pointing up) +15% to +20%
Marginal to poor loss experience: Increase (Purple triangle pointing up) +25% to +30% and higher
Transit and stock throughput (London): Increase (Purple triangle pointing up) +5% to +7.5%, higher for heavy nat cat exposures

Key takeaway

While rates continue to rise, the percentage increases are decelerating, and the market is becoming more predictable.

The London marketplace was the first to modify pricing, coverage and deductibles, beginning around Q4 2018. London initially lost some market share as a result but is now trading far more positively in 2021 with more underwriting appetite, capacity and pricing flexibility. London is currently regaining market share.

  • While there is still underwriting discipline with a firm technical approach, the upward rate trend has slowed, albeit with higher levels of scrutiny for accounts with heavy natural catastrophe exposures.
  • The combination of insurers looking to grow and new capacity arriving has created competitive tension and opened far more marketing options. Business is being positively remarketed (which we expect to be a feature of 2021) and London insurers are reporting significant increases in their U.S. portfolios.

Starting renewals early continues to be critical, especially for stock throughput programs and higher risk industries.

  • Detailed renewal data is also critical and is impacting terms, conditions and price.
  • Market capacity continues to stabilize, but underwriters remain focused on underwriting profitability.
  • There are new entrants in the market, particularly in London.
  • Quota share continues to be more prevalent as a way of managing portfolio volatility.
  • Underwriters are looking hard at accounts with adverse loss experience and accounts in challenged industry segments (pharma/life science, food and beverage, automobiles and retail stock throughputs). Markets are showing little interest in covering large retail store risks.

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

  • Increased retention levels are being assessed on a case-by-case basis.
  • When marketing profitable business, we are still securing competitive terms, but virtually no buyers are seeing reductions in price unless they had a multi-year deal in place or there was a significant reduction in year-over-year exposures, and in both cases good historical loss experience is a prerequisite.
  • Capacity has stabilized but is still being carefully deployed.
  • Excess stock capacity in the U.S. market has all but dried up but is widely available in London.
  • Insurers are intent on obtaining survey reports for warehouse locations.

Broad manuscript policy terms are still achievable, but buyers should take note of several trends and coverages that are being highly scrutinized.

  • Market-wide push to include non-named windstorm events (including straight-line wind) into what were historically named windstorm aggregates
  • Broad wording for spoilage, deterioration and decay
  • Broad control of damaged goods cover, including fear of loss
  • Coverage for voyage frustration/extra expense
  • For strikes, riots and civil commotion (SR & CC), greater scrutiny from insurers on storage, particularly on retail store exposures
  • The application of policy deductibles and catastrophic perils definitions
  • Strong emphasis on good risk control practices (packaging, load/stow, temperature monitoring, theft protection, and logistics carrier and warehouse contracts)
  • Marine cyber exclusions
  • Communicable disease exclusions

Insurance buyers should be ready for change.

  • Alternative risk solutions are being more heavily explored (captives, SIRs, integrated cargo/property placements)
  • Analytics are playing an important role in setting terms, conditions and pricing in this changing environment. While the perils diagnostic for catastrophic modeling is the most commonly used tool, buyers are also utilizing loss trend analysis, deductible studies, heat mapping and total cost of risk (TCOR) exercises.

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Contact

Anthony DiPasquale
Head of Marine North America

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