Global marine premiums fall another 9% YOY

Global marine underwriting premiums for 2016 fell to $27.5 billion, a 9 percent reduction on the figure reported for 2015, the International Union of Marine Insurance (IUMI) said on Sept. 18.

Vice-chairman of IUMI's facts & figures committee, Astrid Seltmann explained: "The 2016 number follows a continuing downward trend in marine underwriting premiums. In 2015, the adjusted figures of $30.5 billion was in itself a 9.9 percent reduction from 2014. We attribute part of the reduction to the strong US dollar when compared with other currencies, but also to general weak market conditions in terms of the global economy, general commodity prices and the poor state of the shipping and offshore sectors. This worrying downward trend leads to an increasing mismatch between income levels and the marine insurer's obligation to cover major losses, particularly in light of the trend for larger vessels and greater accumulation of risks in port".

From the total 2016 income, 50.2 percent were generated in Europe, 27.9 percent in Asia Pacific and 9.5 percent came from Latin America.

Transport/cargo contributed 54 percent to the total. Premium income in the cargo sector was reported as $15 billion for 2016 – a 6 percent reduction on the 2015 figure. Exchange rate fluctuations impact most strongly on cargo premiums and the recent strong dollar has "reduced" premium income from most other countries, IUMI said. This has made it challenging to identify any real market development, according to the statement.

The 2015 Tianjin disaster significantly eroded the performance of the 2014 and 2015 underwriting years. The final position of 2016 is still unclear due to the impact of the loss of the Amos 6 satellite and the current issues surrounding Hurricanes Harvey and Irma.

The trend towards higher value cargoes and increasing accumulation of values in ports is likely to continue and this will impact further on loss ratios. It is also impacting on premiums which are increasingly reflecting stock exposure rather than transit exposure. Added to this, increases and changes in trade patterns as well as the general economic and political environment is causing additional uncertainty in this sector.

Donald Harrell, chairman of IUMI's facts & figures committee, commented: "Global premium income continues to fall and this puts pressure on our sector. Although, fortunately, we are seeing only moderate major losses currently, that situation can reverse at any time. Hurricanes Harvey and Irma are examples of this and their true impact is yet to be seen. Exposure to risk will only increase as vessels grow larger and values accumulate in port. A drop in premium income makes it challenging for underwriters to continue to cover their obligations, particularly in relation to major losses.

"Uncertainty exists throughout our market. Although the global economy appears to be improving, significant concerns or situations could lead to a stall and that will directly impact marine insurance. Global trade might be affected by Brexit as well as the current threat of a more competitive US trading policy created by punitive import taxes and lighter regulation on manufacturing. These changes to global trade flows and trade agreements will affect our sector as they evolve.

“Similarly, the tough shipping market is continuing to adversely affect our premium income, despite the relentless growth in global seaborne trade. A sluggish oil price driven by the activities of OPEC and the rise in shale gas availability has dogged the offshore sector also. And, of course, natural catastrophes continue to pose a very real risk.”

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