Insurance Marketplace Realities — Cargo

November 6, 2018

Rate predictions

  Trend Range
Good loss experience No change or slightly up Flat to +5%
Marginal/poor loss experience Increase +5% to +15%

Key takeaway

With an increase in frequency and severity of cargo claims, the market has become less predictable, and underwriters are scrutinizing risks more closely to improve profitability. Early planning and proper collection of critical underwriting data is key to achieving the best results.

The long-standing downward trend for rates is over.

  • The market turn is a result of multiple years of rate reductions and catastrophic claim events such as Tanjin, Thai floods, Atlantic hurricanes and earthquakes.
  • Some industries have been hit especially hard: automobiles, life sciences, pharmaceuticals, aerospace and soft commodities.
  • Attritional losses and high operating expenses have also pushed insurers to revisit their strategy and risk appetite.
  • Reductions are very difficult to achieve without a thorough marketing exercise.

Capacity is still readily available and new capacity continues to enter the U.S. market. However, consolidation continues as well.

  • Large recent mergers will impact the cargo sector.
  • At Lloyd’s there continues to be a tightening, with some syndicates exiting the cargo space and an increased focus on book health rather than growth.
  • Insurers are employing stricter underwriting guidelines to make better use of each market’s available capacity.

Broad manuscript policy terms are still achievable with sharper underwriting focus on:

  • Catastrophic risk for goods in storage
  • Broad wording for spoilage, deterioration and decay
  • Broad control of damaged goods, including “fear of loss”
  • Packing on high-tech machinery and equipment, as well as pharmaceutical and life science products
  • Security on high-theft commodities, such as apparel and accessories, food and beverage commodities and pharmaceuticals