Research

Marketplace Realities 2018: Marine

November 6, 2017

    The one thing

    With pricing reductions almost impossible to achieve without moving markets, prepare early and present good information about your risks to obtain better outcomes in a more complicated market environment.
  • For the first three quarters of 2017, soft market conditions have continued to create a competitive rating environment for shipowners, operators of ports, terminals and other marine facilities, and for those involved in international logistics or trade involving the shipment of general cargo.
  • For the vast majority of insurers, marine business is unprofitable and unsustainable at current pricing levels.
  • In the aftermath of Hurricanes Harvey, Irma and Maria, insurers are trying to estimate their losses plus what additional cost for reinsurance they may need to pay. They are unlikely to be able to absorb these additional costs and will need to pass them on to clients.
  • In this climate of uncertainty most carriers are applying a rule of no reductions on renewal business while looking for increases on business where losses have occurred.
  • It is unclear whether this market hardening will create only a short-term scenario where deals are tougher to negotiate or if it will signal the end of an era of continually declining rates.
  • After another year of reduced rates, principally driven by the continued excess capacity in the market, insurers are now trying to implement underwriting discipline on their existing business while also looking for new opportunities. We are currently seeing more business heavily remarketed, with some owners prepared to pay extra for carrier continuity and others changing carriers to achieve a flat premium or savings.
  • Price prediction

    Cargo
    Flat to +10%

    Hull Flat to +10%

    Marine liability
    -5% to +10%
  • Many insurers have evolved their proposition for ports and terminals to include property damage coverage in a package with liability risks. This is advantageous for owners and operators driving efficiencies and cost savings. Excess property requirements can then be placed in the property market.
  • Marine liability business continues to be attractive to insurers, with most insurers now having teams in place to write this business following a hiring spree over the past 12–18 months. We are,  however,  seeing  some  influential  marine  market  underwriters  imposing  standard minimum increases (up to 10%) regardless of record.
  • The marine cargo market has remained soft for most general cargo, but for those in the automobile business, premiums have leapt due to a withdrawal of capacity following significant losses with regard to cars in transit or stored in the open. Terms have also hardened for those involved with satellite launches where capacity has withdrawn following a rocket explosion.