Lars Lange, International Union of Marine Insurance (IUMI) Secretary-General examines the risks that will test marine insurers and their clients in the coming year.
The risk profile of the marine insurance sector tends to be based on long-term trends rather than short-term issues but there are a number of factors that are currently influencing risk management.
Whilst marine insurance tends to deal with physical incidents which are not really impacted by COVID-19, the pandemic has had an effect on the sector. In Q1 and early Q2, global trade dipped significantly with an estimated $1 billion wiped from the books. This directly translated into fewer cargoes being transported and, consequently, will reduce premium income. COVID-19 is also delaying on-board audits and surveys as well as some routine vessel maintenance schedules – this has the potential to increase hull and machinery claims in the future. IUMI recognises as well the stress put on on-board personnel by crew change problems and urges responsible parties to solve this.
A broader issue is the increasing focus on environmental, social and governance (ESG) and sustainability. All businesses are beginning to change their operations and activities to align with enhanced expectations, particularly as ESG compliance is fast becoming both measurable and reportable. Marine underwriters will need to work differently in the near-future but they will also need to be aware of how ESG compliance is impacting the risk profile of their client base. For example, there is increasing pressure on carriers to adopt new practices and technology and this, in itself, has the potential to increase the risks associate with insured assets. Changes to climate patterns is one reason for the enhanced focus on ESG and marine underwriters are currently having to contend with unpredictable NatCat events. These are expected to continue for the foreseeable future and will need to be incorporated into future underwriting planning and practice.
Similarly, the trend towards digitalisation and the adoption of more intelligent data-sets will continue to exert an impact. In many cases, COVID-19 has sped up this process. Increasingly, underwriters are taking a much more data driven approach to assess risk as a broader range of information is becoming available. Whilst this places an additional burden on insurers, the result is a more scientific and accurate approach to assessing and pricing many types of marine risk.
Digitalisation across the maritime industry has heightened a relatively new risk in the form of cyber-security. As companies and vessels become more reliant on technology, their capacity to be attacked by cyber-criminals increases. The move towards autonomous ships will only exacerbate this type of risk which needs to be fully understood before it can be adequately insured.
Whilst these relatively new trends are likely to exert their influence for some time, marine underwriters will also see a continuing impact from piracy, large vessel fires, mis-declared dangerous cargoes, and increasing accumulation of risk onboard large vessels and in ports and storage facilities.
The shipping and logistics industry continues to evolve as does the external environment in which it operates and marine underwriters are adapting their services and activities to ensure they maintain the ability to provide adequate and robust insurance cover.