Marine insurers have been warned that the positive trends which have been witnessed last year are fragile with a range of risks set to threaten the progress made on claims levels.
IUMI (International Union of Marine Insurance) has released its annual figures during its annual conference, which is being held online from Seoul, South Korea.
Marine underwriting premiums for 2020 were estimated to be US$30.0 billion which represents a 6.1% increase from 2019. Global income was split by region: Europe 47.7%, Asia/Pacific 29.3%, Latin America 9.3%, North America 7.7%, Other 6.0%.
By line of business, cargo continued to represent the largest share with 57.2% in 2020, hull 23.8%, offshore energy 12.1% and marine liability (excluding IGP&I) 6.8%.
Vice-Chair of IUMI’s Facts & Figures Committee, Astrid Seltmann explained: “We are reporting an increase in absolute premiums for 2020 in both the hull and cargo markets. These are derived as a combination of volume – trade, values, global fleet size – and rates per insured unit. It appears that the European market bottomed-out in 2019 and is now strengthening again; and the Asian market continues to enjoy a year-on-year increase that began in 2016. We see this primarily as a market reaction to the depleted premium base experienced in preceding years.”
“In general, cargo and hull underwriting results have improved in 2019/20 across all regions and this is largely due to the strengthened premium base coupled with a very low claims impact,” she added. “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.
“The recent claims environment has been relatively benign, which needs to be seen in connection with reduced activity in some shipping segments in 2020 (cruise, container trades) as a reaction to COVID measures. With the economy recovering and shipping and offshore activity increasing, it can be expected that both claims frequency and severity will also rise again.”
However, Philip Graham, Chair of IUMI’s Facts & Figures Committee warned there were risks that had the potential to undo all the progress if not addressed.
“Our analysis for 2020 shows some signs of encouragement for market development in all main marine insurance lines and in all global regions. But we should remain cautious as there are a number of factors at play,” he said. “On the positive side, we are seeing new markets enter the marine insurance space, particularly offshore wind where project sanctioning has overtaken offshore oil and gas for the first time. 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.”
“More generally, OECD business confidence has returned, or is rapidly returning, to pre-COVID levels, world trade forecasts are extremely positive and this will drive demand for shipping and, consequently, marine insurance. Although freight rates in general are the strongest since 2008, some sectors are faring better than others with containerships and dry bulkers performing much better than the tanker market. But overall, shipping appears to be bouncing-back strongly from the outbreak of COVID.”
“Increased shipping activity, reactivation in the offshore energy market and an increasingly ageing merchant fleet have the potential to reverse the current downward trend in marine claims. Underwriters need to be watchful and take care that increased claims don’t erode the advances made recently in strengthening the overall premium base.”
Graham added the organisation is taking a number of steps to play a role in driving sustainability and its members’ ESG performance.
“IUMI’s Facts & Figures Committee is also tracking a range of ESG initiatives and data to ensure the membership fully understands and remains aligned with the UN Sustainable Development Goals,” he explained.” Specifically, we are monitoring illegal, unreported and unregulated fishing activities to ensure we are playing our role in protecting the global fishing industry for the future. We are also monitoring the ship recycling industry to educate underwriters on responsible and sustainable vessel demolition; and we closely follow IMO’s decarbonisation ambitions so marine insurers are ready to protect vessels using new fuel types and propulsion methods.”