Concern remains over possible increase in claims as shipping activity rebounds from the pandemic
By Adam Corbett
Marine insurance premiums increased by 6% in 2020 to $30bn as the market continued to recover, according to figures presented at the International Union of Marine Insurance (IUMI) annual conference.
The insurance association’s figures show that the market bottomed out around 2019.
A recovery in cargo insurance, which accounts for nearly 60% of marine business, has led the way, increasing by 5.6%, compared to 2019, to $17.2bn. The hull business increased by 6% to $7.1bn.
Nordic-based underwriters continued to grow their market share, but the London market was hit by the withdrawal of capacity from the Lloyd’s of London.
The largest increase was in the offshore energy market which increased 8.7%, compared to 2019, to $3.6bn.
The marine market was helped by a continuing low loss ratio. The reduced levels of shipping activity in the Covid-19 pandemic hit shipping markets last year but kept claims down.
Insured valuations also increased for the first time since 2008. The emergence of ultra-large containerships, which showed the largest increase in valuations, was one of the reasons behind the increase.
IUMI’s vice chair of facts and figures committee Astrid Seltmann said: “In general, cargo and hull underwriting results have improved in 2019 and 2020 across all regions and this is largely due to the strengthened premium base coupled with a very low claims impact.”
But she said the recovery is still fragile and that it is unclear how long it will last.
“This is a positive trend but, as this recovery started from a very low base, it is not yet clear if the current improvement will be sustained in future years to give more predictability for shipowners, cargo owners and insurers,” Seltmann said.
One concern is that claims could be set to increase as shipping activity continues to pick up. Shipping also has a major safety concern — the increasing frequency of fires on large containerships.
Another is that port congestion and delays, caused by the sudden market recovery, are leading to an accumulation of cargo and shipping risks.
That could lead to significant claims in a market that is exposed to extreme weather events.
“With the economy recovering and shipping and offshore activity increasing, it can be expected that both claims frequency and severity will also rise again,” Seltmann said.
IUMI facts and figures committee chair Philip Graham also urged caution over future market trends. “Underwriters need to be watchful and take care that increased claims don’t erode the advances made recently in strengthening the overall premium base,” he said.
But, on a more positive note, he pointed to the emergence of the offshore wind market within the marine insurance spectrum.
“Although currently a very small piece of the global energy mix — representing just 0.2% —offshore wind has the potential to grow rapidly and become a significant marine insurance line,” Graham said.
IUMI’s annual conference is being held online from Seoul because of the pandemic.