A prolonged hard market and geopolitical risks are reshaping the marine market

There is a stronger emphasis on risk management and resilience planning among businesses, which can reinforce a more cautious attitude from insurers. That’s the view of Stephen Rudman, head of marine, Asia, at Aon, who spoke to EAIC Today to discuss the factors influencing the marine re/insurance market.

“Insurers are cautious about deploying capital due to ongoing uncertainties, leading to a more conservative approach to underwriting and a reluctance to reduce rates,” Rudman said, explaining the prolonged hard market.

The hard market has led to stricter policy terms and pricing, with elevated premiums and shrinking capacity making it tough for businesses to secure favourable terms. Although new capacity, such as from managing general agents, is entering the market, Rudman noted that it brings long-term risks due to “often-aggressive pricing strategies”.

A major contributor to the hard market is geopolitical risk, ranging from trade disputes to conflicts. “Geopolitical tensions elevate the perception of risk among insurers, leading to stricter underwriting and making insurers more selective about the risks they are willing to cover,” Rudman explained.

Geopolitical strains, trade wars, and regional conflicts disrupt trade routes, increase costs, and trigger regulatory changes, making contingency planning essential. 

“After a period of softening rates, hard markets can last for several years.”

“Shipping routes may be rerouted in response to geopolitical threats, affecting cargo and hull risk assessments,” he cautioned. Insurers may impose exclusions on high-risk routes or cargo types, especially war cover, which must be priced accordingly. 

Heightened regulatory challenges add further complexity for insurers and clients, and rising claims from catastrophic events exacerbate the situation. 

“A rise in relevant claims, particularly from catastrophic events influenced by geopolitical factors, maintains pressure on marine insurers and reinsurers to keep premiums high,” Rudman said.

Reinsurers, who share risks with primary insurers, also face challenges in pricing which, according to Rudman, “puts pressure on marine insurers and reinsurers to keep premiums high across the board”.

“After a period of softening rates, hard markets can last for several years, especially when external factors such as global instability continue to exert pressure,” Rudman remarked.

Be prepared 

To prepare for future risks, Rudman urges companies to explore alternative risk transfer solutions. “Insurers may need to re-evaluate risk models and claim reserves based on evolving circumstances.”

As well as geopolitical risks, he identified other top risks businesses should be aware of, including economic instability, cybersecurity threats, technological disruption, talent shortages, climate change, and environmental regulations.

Increasing reliance on digital technologies exposes the marine industry to cybersecurity threats. “Cyber risks are continuously evolving,” Rudman warned, urging companies to invest in robust measures to protect operations and data.

Additionally, the growing focus on environmental regulations will require investments in cleaner technologies to mitigate liabilities. “Stricter environmental regulations and compliance requirements are rising. Companies should prepare for potential liabilities related to emissions, waste, and sustainability,” he said.

To mitigate risks arising from natural disasters, pandemics, and geopolitical tensions, Rudman advises conducting risk assessments, building resilient supply chains, diversifying suppliers, and exploring alternative logistics strategies. 

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