Intense competition squeezes marine rates in Asia to unsustainable levels

The marine market in Asia remains ultra-competitive as insurers continue to invest in targeting growth in the region, Mike Davies, chief underwriting officer, marine, Asia-Pacific for XL Catlin, told EAIC Today.

“This is evident as we see an influx of new players with new capacity opening up marine underwriting units,” he said.

“Despite increasing trade volumes globally and a growing world hull fleet, significant claims have impacted underwriting results, leading to deterioration in market results in 2014 and 2015. The question for the industry is: how sustainable is the current rating environment?”

Underwriting discipline must be maintained not just in terms of pricing but also scope of coverage offered, said Davies.

“We are seeing some underwriters broadening their terms and conditions without adequately reflecting the changes in premium and without due consideration for how these changes will impact future incurred claims,” he said.

This trend is more pronounced for hull insurance although it affects cargo insurance too, he noted.

“We expect some corrective action from the market in the next 12 months—there is a need for the industry to adjust the strategy back to technical underwriting and rating as the squeeze on the underwriter’s technical profits continues,” Davies said.

In the coming year, Davies expects the repatriation of Asian business back into the Asian insurance markets rather than being placed outside the region.

“This is due to the fact that there is a growing capacity and technical expertise within the main marine insurance hubs including Singapore, Shanghai and Hong Kong,” he said. Second, as online solutions start to develop, he anticipates a greater degree of commoditisation of cargo insurance business.