Marine Cargo Insurance Market Still Not Profitable
Sean Dalton, Chair of the Cargo Committee of the International Union of Marine Insurance (IUMI) has said at the organization’s annual conference in Toronto, Canada, that there has been a 2.5 percent increase in 2018 global premiums to $16.6 billion but that this increase was largely attributable to growth in global trade and exchange rate fluctuations. He added that the marine cargo market was in a state of “accelerating change” driven by underwriters taking action to address unprofitable results and to improve performance.
Dalton stated: “On a global basis, the cargo line is unprofitable and has been for a number of years. Premiums have not been technically adequate to cover losses and expenses and, as such, have not delivered an acceptable return for capital providers. A significant reason for this ongoing situation is the commoditization of this speciality line of business which has lowered entry barriers and attracted new entrants, some of whom are now exiting.
“As result, underwriters are addressing their portfolios with urgency and reviewing technical rate adequacy, expenses, terms and conditions, deductible levels, and capacity/limit deployment. A greater focus has been placed on commitment to business, stability and capabilities to ensure underwriters deliver a stable offering that can be robustly delivered.”
According to IUMI, world trade global growth is expected to be 2.6 percent in 2019 and 3 percent in 2020 and says that this, coupled with governments in emerging markets investing in infrastructure and promoting domestic manufacturing, gives a positive outlook for cargo insurance. The marine insurers’ body noted, however, that weaker economic projections and concerns over trade wars could “dampen expected growth and are of concern”.
Dalton concluded: “In addressing these issues, cargo insurers are encountering old and new challenges. These include compliance, sanctions, war, emerging risks and new coverage requirements. With each cargo insured loss there are related uninsured losses. These might include business interruption due to supply chain issues, trade disruption, or loss of market.
“Emerging technologies may provide tools and capabilities to enable the development of new products, he continued. “To meet these needs, cargo underwriters must get the basics right if they are to be in a position to capitalize on future opportunities. It is certain that exposures will continue to increase in size and complexity for the cargo underwriter and this will require a sustainable approach to the business to meet the demands of the present and the future.”