The President of the International Union of Marine Insurers (IUMI), Mr Dieter Berg, predicted an impending shake-up in the marine insurance sector driven by the current environment of disruption, during his opening address at IUMI 2017 in Tokyo yesterday morning.
Disruption, according to Mr Berg, is the raft of technology and business innovation that is destroying existing business models and which extends to every corner of the business world. It is exacerbated by the current macro-environment of a stagnant economy and increasing national protectionism that is continuing to affect premium income.
Mr Berg believes that the specific expertise required to insure the niche marine sector coupled with the high service levels delivered within an international marketplace and the strength of personal and business relationships will bode well for the future.
Slow growth continues despite political climate
Global seaborne trade increased by 3.5% in 2015 and 2016 despite political uncertainties in various parts of the world, said Mr Donald Harrell, Chairman of the Facts & Figures Committee, in his report delivered at IUMI 2017 yesterday.
“Seaborne trade is 85% of all global trade and the growth has been very consistent over the past five years,” he said. 2016 saw 11.1 billion tonnes of goods being shipped, with energy accounting for the lion’s share of all trade (38%).
This growth occurs in a climate of political change, with US trade policy shifting towards protectionism, Brexit threatening upheaval in Europe and possible looming hostilities on the Korean peninsula.
2016 has been called the toughest year for the marine industry since 2008. “There have been signs of improvement, but it is still tough to see where we will be over the next five years,” he said.
Global marine premiums continue to fall
Global underwriting premiums in the marine insurance industry fell to US$27.5 billion in 2016, a 9% reduction when compared to 2015, reported Ms Astrid Seltmann, Vice-Chairman of IUMI's Facts & Figures Committee.
Speaking yesterday, she explained: "The 2016 number follows a continuing downward trend in marine underwriting premiums. In 2015, the adjusted figure of US$30.5 billion was in itself a 9.9% reduction from 2014. We attribute part of the reduction to the strong US dollar when compared with other currencies, but also to general weak market conditions in terms of the global economy, general commodity prices and the poor state of the shipping and offshore sectors.
“This worrying downward trend leads to an increasing mismatch between income levels and the marine insurer's obligation to cover major losses, particularly in light of the trend for larger vessels and greater accumulation of risks in ports."
Premium income came mainly from Europe (50%) and the rising market of Asia Pacific (27.9%). Transport cargo was the best performing line of business, with 54% of the 2016 premium and global hull came in a distant second with 25%.