News Non-Life13 Feb 2018

Asia:Marine insurance clients urged to rearrange existing programmes for efficiencies

| 13 Feb 2018

Large premium reductions are not expected to be available in the marine insurance market in Asia in 2018, unlike in prior years, according to Aon in its Asia Market Review 2018 released recently. Savings, though, may still be possible for risks which present well.

Aon advises clients to look to rearrange their existing programmes in order to seek efficiencies in their insurance costs, if they do not think a standard renewal approach will be effective – consider STP (stock-throughput policy) arrangements rather than traditional cargo and property covers. In 2018 and beyond, digitisation and technology will have an even greater impact on the maritime industry. E-commerce will continue to become increasingly pervasive and digitised supply chain technology, such as blockchain, will offer increasing opportunities to the sector.

Whilst digital technologies and connected devices enhance the ability to record and share information, reduce errors and omissions (E&O) exposures, and streamline procedures, they also bring increased cyber risk. As reliance upon digital technologies increases and the levels of automation in the sector rises, clients who do not purchase bespoke cover will leave themselves open to significant losses, the report says.

Aon notes that 2017 was another challenging year for the maritime industry with continuing, depressed commodity prices, sluggish global trade, and a wavering global economy. Buyers of insurance sought and achieved premium reductions across the main classes of Cargo, Hull, and P&I, with reductions on offer of 5-10% on average depending on the line of business, risk, and loss record. A benign claims environment in Asia insulated insurers against another year of soft market pricing conditions.

In 2017, there was a tangible increase in the number of M&A transactions across all industry sectors where Warranty and Indemnity (W&I) insurance often plays a key facilitating role. W&I benefits both parties in an M&A transaction and the popularity of this type of cover is set to grow exponentially in the coming years, says Aon.


The cargo market in Asia remained soft in 2017 with premiums decreasing in combination with the widest covers Aon has ever seen, whereas London has experienced some levelling off in the last quarter of 2017. Cars, pharma, and commodities were segments hit by losses globally and as a result, there was a withdrawal of capacity and appetite for these risks, with cars particularly negatively affected. The poor historic loss experience of the sector means that even automotive sector clients which are willing to take large self insured retentions face steep pricing and a dearth of capacity on offer. Within the commodity industry, several insurers suffered severe losses as a result of misappropriation, which potentially have values running into the hundreds of millions of dollars. The influence on premium appears limited, but as a result, insurers moved to exclude cover, sub limit cover, and impose large aggregate deductibles.

2017 was also a year of increasing maturity in the market. Aon saw more clients enhancing their existing cargo programmes, and achieving coverage and pricing improvements by utilising more sophisticated STP programmes, rather than covering cargo through supply chain under separate property and cargo programmes. Although commonplace in many developed markets, STP programmes are still underutilised in Asia.

For 2018, Aon still sees reductions possible for good performing and well-managed risks; however, in specific industry segments like cars, pharma, and commodities, Aon expects more restrictive underwriting by insurers.

Hull & Machinery (H&M)

The status quo continued in Asia during 2017 as owners continued to enjoy modest reductions alongside broad cover and low deductibles. Whilst underwriters lamented what they saw as an unsustainable position, the relatively low incidences of loss and the continuing influx of capacity supported the incessant drift of this soft market. The international H&M market continues to talk of a coming ‘hardening’, and whilst evidence of this in practice so far is scant in Asia, the logic is hard to refute. Hull insurers, which are for the most part commercial entities, are simply not making enough money from this line. International Union of Marine Insurance (IUMI) and The Nordic Association of Marine Insurers (CEFOR) data continue to show that many insurers are writing a breakeven at best book, with no room for larger losses, and even less room for further reductions in premiums. Aon continues to monitor the situation, but it anticipates that the soft market in 2018 is approaching the bottom.

Marine Liability

In 2017, the size and insured values of Ports and Terminals in the region continued to increase, as did the size and value of ships and cargo. As this trend continues, clients faced with increasing aggregation of risk will be keen to ensure that they are buying sufficient coverage. Within the traditional logistic insurance market, the majority of insurers in Asia still provide limited and restrictive liability covers. In 2017, Aon saw insurers being more willing to insure “full value” liability for their clients, empowering clients with wider and more flexible insurance solutions.

Increasing cyber exposure

A number of high profile losses have begun to crystallise cyber risk in the mind of clients across multiple industry sectors. The Marine and Logistics sectors can be especially exposed due to the increasing use of technology in complex supply chains. The extent of BI coverage available to clients under traditional Property Damage & Business Interruption (PDBI) policies is an area of contention, and therefore clients are advised to clarify their existing coverage position and as an optimal solution, to buy standalone cover for this risk, says Aon.


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