Uncertainty in marine market
18 Oct 2017
The global marine market faces a challenging and uncertain outlook after premiums last year fell 9%, continuing a downward trend.
International Union of Marine Insurance (IUMI) facts and figures committee chairman Donald Harrell says risk exposures are increasing as vessels grow larger, and sliding premium income makes it challenging for underwriters to cover their obligations, particularly for major losses.
“The tough shipping market is continuing to adversely affect our premium income, despite the relentless growth in global seaborne trade,” he told an industry conference in Tokyo last month.
Underwriting premiums fell to $US27.5 billion ($35.2 billion) last year, after sliding 9.9% the previous year.
The cargo sector, which accounts for 54% of the total, eased 6%, resulting in a technical loss for a fifth consecutive year.
The strength of the US dollar and weak economic trading conditions contributed to the decline.
IUMI cargo committee chairman Nick Derrick says the sector is suffering overcapacity and a decline in underwriting discipline.
“The difficult market conditions continue in the cargo market and show no immediate signs of abating,” he said.
“With commodity values, such as for metal and copper, and commodity volumes increasing alongside a simultaneous decrease in cargo premiums, it is safe to say we are not in a good place.”
Hull premiums fell 10% to $US7 billion ($9 billion), with ageing ships contributing to falling vessel values.
But IUMI ocean hull committee chairman Mark Edmondson says improving technical standards and new regulations are improving the risk profile in a benign claims environment.
Looking ahead, cyber security is moving up the risk register, while new technology for unmanned and autonomous vessels is moving faster than anticipated and is expected to have a significant impact.
Offshore energy sector premium income slumped 21% to $US3.6 billion ($4.6 billion) last year, on top of a 20% drop the previous year, as weak oil prices caused a downturn in activity and the postponement and cancellation of projects.
“In recent years, it would appear claims have exceeded the global premium base and the past two underwriting years have seen significant losses,” IUMI offshore energy committee chairman James McDonald said.