Research

Insurance Marketplace Realities — Marine hull and liability

November 6, 2018

Rate predictions

  Trend Range
Hull No change or slightly up Flat to +15%
Marine liability No change or slightly up Flat to +10%
Excess liability No change or slightly up Flat to +10%
USL&H No change or slightly up Flat to +10%

Key takeaway

For the first time in many years the marine market is hardening. The days of easily achievable, across-the- board reductions for clients with good loss records appear to be coming to an end.

In 2018, maintaining an expiring price is considered a good result; most markets are increasing rates for those with less than perfect loss records. We expect this trend to continue in 2019.

  • For best renewal results, early planning and discussions are a must.
  • Clients should also be prepared to sacrifice long-term relationships with their underwriters if they want to achieve optimal financial results.

The Lloyd’s hull market is taking a tough stance on renewals, which could influence the U.S. domestic markets.

  • The changing appetite in London and a demand for stricter underwriting discipline have not yet impacted U.S. domestic markets — but they could.
  • While international “blue water” tonnage is feeling the strain of increasing rates, U.S. inland and coastal tonnage has avoided the stress because the domestic hull market has a robust appetite for premium.

There remains ample capacity in the marine liability market in both the U.S. and London.

  • Most marine liability renewals are not seeing the same pressure for increases being felt in the hull markets.

Marketplace consolidation is a key factor in changing marketplace conditions.

  • The AXA-XL Catlin merger will be completed toward the end of 2018. The Hartford announced the purchase of Navigators, one of the largest U.S. markets for marine liabilities, in August 2018, with the deal set to close early in 2019. With this consolidation of markets, competitive leverage will decrease.
  • We do not yet know whether there will be any change in philosophy or appetite for underwriting.

The London Lloyd’s market, a significant player for U.S. marine risks, has recently seen several key syndicates cease underwriting.

  • The remaining syndicates have been asked by Lloyd’s management to provide business plans with a strategy for profitability.
  • These developments have already resulted in a tightening of pricing, which is likely to continue into 2019.

Some underwriting capacity in the U.S. is set to expand early in 2019.

  • This could counteract some of the consolidation discussed above.