Technology and Lloyd’s create tailwinds for RSG in choppy marine market

Ryan Specialty Group (RSG) operates through three managing general agents (MGAs) SafeWaters, Trident and Lodestar, and one third-party administrator (TPA) Smooth Waters in the marine market, and is growing the business by harnessing technology for tailored solutions to clients. A reduced capacity after the 2017 catastrophe events and the Lloyd’s performance review may propel the business further.

That is a summary of how Jorge Pecci, head of marine, RSG Underwriting Managers (RSGUM) and chief executive officer of SafeWaters Underwriting Managers, and Miles Wuller, chief operating officer of RSGUM, assess the marine market.

They stress that the operating environment for marine insurance is not optimal. Global marine underwriting premiums shrank 9 percent year on year to $27.5 billion in 2016, according to the latest annual statistical report on the marine insurance market by the International Union of Marine Insurance (IUMI).

IUMI estimated cargo premium at $15 billion for 2016, representing a decline of 6 percent from 2015 and a further 9 percent decline from 2014.

Since then, the marine cargo insurance market has been improving or stabilising, but it remains highly competitive with an abundance of capacity, IUMI noted in March 2018.

“It is a very tough environment right now,” says Pecci. “Carriers are trying to find their place after the very difficult cat year 2017 which affected the whole market,” he notes.

A loss picture

Hurricanes Harvey, Irma and Maria (HIM) have caused significant losses for marine insurers in 2018, further weakening some players already battered by a soft market. Nick Derrick, chair of the IUMI cargo committee, predicted that HIM could be a pivotal moment for the London and US marine cargo market.

For RSG’s marine practice, HIM was less of a game-changer, but the operating environment has certainly been affected.

“Jorge’s MGA, SafeWaters’ yacht practice dramatically outperformed the industry last year particularly through the storm events, through risk management and risk selection,” says Wuller.

“Post HIM, many players have been losing capacity or exited yacht. It allowed SafeWaters to gain incremental capacity while much of the market is contracting in this environment,” he notes.

Lloyd’s, a leader in marine, is currently conducting a portfolio review, focusing on the poorly performing classes, and is talking to syndicates about potential action in order to boost profitability.

Lloyd’s is aiming to reduce the business volume of particularly challenging classes. As part of the review, Lloyd’s is asking some syndicates to pull out of certain lines, and marine is likely to be among them.

“Lloyd’s is definitely going through substantial change and restructuring. We expect there to be fewer players and, less capacity, which will hopefully benefit price,” says Wuller.

Pecci agrees: “The measures being taken at Lloyd’s could affect marine pricing.

“There are signs that they are imposing restrictions and that we may see a substantial change,” he adds.

While price increases would benefit RSG’s marine business, it is not required for the group to continue growing in the segment, the executives note. Through its MGAs, RSG can insure power boats and yachts of nearly any size, from runabouts to mega-yachts. For cargoes on land, at sea and in storage, RSG offers coverage from damage in-transit to war and terrorism.

RSGUM decided to enter marine around two years ago. “We want to enter new segments only if we feel that we can attract differentiating talent.

“We want to make ourselves distinct through a product or service. We don’t want to be in a commodity product,” he adds.
Marine is often dominated by global carriers’ account practices, and RSG is building its own niche with small and medium-sized clients to offer risk advisory services in a consultative approach rather than competing on price, Wuller notes.

RSG concentrates on tailor-made solutions, working with customers to minimise the chances of a loss with the help of technology. For example, the group uses infrared technology to inspect a vessel and provides the customer with a copy of the report showing the weak points of a yacht and allowing for remediation measures and safety improvements.

Claims and loss prevention unit, Smooth Waters, services the group, tailoring individual loss control for clients for yachts, big commercial vessels, marine terminals and shipyards and logistics.

Bespoke solutions

SafeWaters offers customised insurance solutions for yachts, ocean cargo, marine liability, and hull & machinery. The firm uses state of the art technology such as Automatic Identification System (AIS) to identify the location of a vessel and control aggregation.

“We provide services through our vendors, which benefits our clients,” Pecci says. SafeWaters accesses catastrophic-related information provided by different entities in the world including earthquakes, floods and fire exposure of locations as well as wind. The data is then customised for clients and supplied in the form of bulletins showing their exposures and offering recommendations of how to cover their risks.

“SafeWaters is becoming a leading agency in the US luxury yacht space. SafeWaters also underwrites cargo business with a particular focus on the middle market in the US and in Latin America,” Pecci says.

Through Trident Marine Managers, RSGUM also writes complex risks, as an example the team has been involved in providing Insurance solutions for unmanned vessels. Trident is a specialty marine and offshore energy MGA dedicated to serving the insurance needs of the maritime industry which has been in the US for over 35 years. Trident offers nationwide coverages with a focus on marine and energy operations in the Gulf of Mexico.

RSG’s unit Lodestar Marine, a recent acquisition, offers fixed premium protection and indemnity (P&I) cover and is one of the few providers to offer limits of liability up to $1 billion, according to the firm. The company provides charter legal liability, specialist operations, and contractual liability, among others.

Lodestar is headquartered in London, and has a footprint spanning the globe. The company currently writes business in the Middle East, Europe, Latin America, US, Canada and the Baltics. They operate with an extensive network of distribution partners following the concept of “global reach local partners”.

“Services are becoming paramount in today’s environment,” Pecci says. “It’s not just that customers are becoming more demanding, but also that the technological environment is becoming more sophisticated,” he notes.

“Vessels include more technology, and marine traffic has increased substantially. As an insurer you need not only to be up to date with the latest technology but also to provide state-of-the-art services that go beyond the actual insurance policy,” Pecci explains.

Due to increased use of technology on ships and ports as well as automated systems, a rising cyber threat is worrying the sector.

The port of Miami, for example, processes one million TEUs (twenty equivalent unit) per year; a main control system contains data for each container location in the port and its cargo, as well as its final destination. “If somebody hacks the system and this data is destroyed or tampered with, this would most certainly cause a major loss,” Pecci explains.

“Some containers may carry perishable goods, some are at risk of explosion if exposed to elevated temperatures. The risk exposure is significant and can cause multi-million dollar claims,” he notes.

The industry is designing prevention measures for such cyber risks, and RSG is developing insurance products that provide compensation in case of such an incident.

“Cyber is a big concern,” Pecci says. “Whether it’s a yacht, a cargo vessel or a marina, they are all exposed to the risk of cyber attacks.

“RSGUM has an MGA that specialises in this type of risk and we work with them to provide solutions to our customers,” he notes.

Jorge Pecci is head of marine, RSGUM, and chief executive officer of SafeWaters Underwriting Managers. He can be contacted at:  Jorge.Pecci@safewatersmaring.com.

Miles Wuller is chief operating officer of RSGUM. He can be contacted at:  MWuller@ryansg.com.