By Trey Bryant
Commercial Marine & Insurance Brokers
Having been rather "soft," or in layman's terms "very competitive" for the last several years, the marine liability insurance market has begun what appears to be an upward trend in the pricing cycle over the last few months.
There are, to be certain, several factors influencing this trend. The collapse of marine insurance giant Reliance Insurance Company and its subsidiaries has caused quite an uproar among various underwriters still active in the market. The resulting search for coverage on the part of insureds left in the wake of Reliance's demise has put a strain on these underwriters and their capacity.
Also, the collapse of two major Australian reinsurers, as well as others in the Pacific Rim, have played a role in the tightening of the market. While the London markets have experienced less than desirable underwriting results, they are remaining active in the marketplace as they are providing a broad range of coverages, but at premiums that are consistently higher than those expiring. The good news is that there are still competitive deals out there from domestic carriers, as well, providing broad coverages at reasonable prices; however, not as inexpensively as in the last few years.
As for the Hull and P&I markets, the same holds true for the same reasons. The withdrawal of several reinsurers from this market has served to drive pricing upward, as capacity has diminished. Here again, however, there are still strong markets available that are providing reasonably competitive pricing, especially on the hull side. The P&I can be a little more difficult to place, depending on loss experience mainly as respects crew coverage. In short, the overall prospectus is that moderate increases in premiums can be expected.
Those insureds who have recently renewed their USL&H coverages have the most mixed array of war stories as any heard or seen in the last several years. The accounts which were in "Clubs" or other forms of self-insured arrangements seemed to have experienced more favorable terms and pricing than those who used conventional carriers- depending on their loss experience.
As for the future, those insureds who will be renewing their coverages in the coming months should expect moderate increases in their costs, depending largely on their loss experience and the respective lines of coverages they will be renewing. It appears that the most likely courses of action to combat these premium increases lie in two major areas: loss control/prevention and self-insurance resources/mechanisms. The most effective form cure is prevention. Many of America's companies are, in our opinion, going to be moving in the direction of loss prevention coupled with various forms of self-insurance mechanisms designed to reduce the amount of dependency on primary layers of liability coverage.
As the probability of rising premiums in the near future increases, so does the quest to manage the cost of risks in a less conventional manner. We are in the midst of a rather questionable time in the stock markets and the global economy. These factors certainly affect the traditional insurance carriers' underwriting attitudes and practices. Meanwhile, the rapid growth of technology will certainly serve to enlighten many insureds as to alternative means of managing the cost of their risks. The end result will be a change in the approach that many insureds take in their purchase of different forms of insurance coverage. Insureds will seek to prevent losses and at the same time to fund primary layers of loss exposure through such mechanisms as captive insurance companies comprised of people like themselves.
Commercial & Marine Insurance Brokers, Inc. is a property and casualty insurance brokerage firm based in Mobile, Alabama specializing in marine and heavy casualty insurance coverage placements for clients throughout the U.S. The primary principal, Trey Bryant, has been in the insurance business for eighteen years. He can be reached at (334)438-4001 or via e-mail at firstname.lastname@example.org.