Data released by the International Union of Marine Insurance (IUMI) reveals that marine underwriting premiums for 2018 marginally increased by 1% on year to $28.9bn. Although with significant challenges facing the market, the modest rise is not enough to declare an improvement in the fortunes of the marine insurance sector, said IUMI Facts & Figures Committee vice chair Astrid Seltmann.
“Changes to frame conditions are the most likely reason for the modest increase in premiums as opposed to any real market development. A continuing growth in world trade will have driven cargo premiums up by 2.5%, and the fluctuating oil price will be pressurising premiums from the offshore energy sector which dropped by 3% in 2018.”
Ms Seltmann said ongoing global uncertainties, including the current tensions in trade, will continue to impact all sectors but specifically cargo and offshore energy. The continued downward adjusting of global trade growth is not helpful for marine cargo underwriting going forward.
High-levels of technical losses continue in all sectors, particularly hull and cargo. “A normalisation of major losses after several relatively benign years is likely to offset any rise in premiums achieved this year,” she said. “Premiums had already plummeted to truly unsustainable levels in 2017, and so any increase begins from a very low base. Only when the 2019 statistics become available will we understand to what degree marine underwriting might have returned to profitability.”
Another pressing concern is the increase in the frequency of fires on container ships, particularly those starting in the cargo area of vessels such as the ones that occurred on the Maersk Honam or the Grande America. This trend has been observed for some years, and the latest figures clearly show a further increase in 2019.
“These fires pose a threat to the crew and cause severe damage to both vessel and cargo. IUMI is working with a range of industry bodies to improve the prevention of such events as well as fire-fighting capabilities onboard,” she said.
The $28.9bn global income was split between regions: Europe 46.4%, Asia/Pacific 30.7%, Latin America 10.4%, North America 6.2% and other 6.3%.
2018 saw Europe’s global share reduce from 49.2% (2017) to 46.4% and Asia’s share increase from 29.2% (2017) to 30.7%.
For global marine premium by line of business, cargo continued to represent the largest share with 57.4% in 2018, hull 24.4%, offshore energy 11.4% and marine liability (excluding than IGP&I) 6.7%.
Continued uncertainty
IUMI Facts & Figures Committee chair Philip Graham said: “Since the 2018 IUMI conference, we’ve seen around 20 entities cease or severely restrict their hull or cargo underwriting activities. Whilst the modest growth in 2018 global marine underwriting premiums recorded this year is, of course, welcome it does not demonstrate any significant uplift to the current market and is more likely to have been driven by economic factors.
“That said, I am hopeful that 2019 will bring more positivity. The hull and cargo markets appear to have bottomed-out, and we are beginning to see a modest uplift, albeit from a low base. Profitability is likely to be pressured by the recent return of major losses, however. More activity in the offshore energy markets is also good news, but reactivation of units adds to the overall risk profile.
“In short, the marine underwriting sector is characterised by uncertainty. At a macro-level this is created by political, economic and environmental factors; and at an industry level it is due to accumulations, a worrying and increasing incidence of major losses; and through a reactivation of the offshore sector.” A