Regional hubs steal marine business from London

Regional marine insurance hubs are starting to pull business away from the traditional centres of London and the Nordics.

This was according to senior executives speaking at a press briefing held by the International Union of Marine Insurance (IUMI) in London, who added that more and more business is being placed in Asia and Latin America, driven in particular by large brokers, which tend to place business locally instead of through traditional insurance options.

However, the soft market is here to stay, said IUMI president Dieter Berg, who said that the big question is what size of loss is required to get the market back to a solid state.

“Successful underwriting during a soft cycle is about technical underwriting, risk adequate pricing, cost containment and underwriting discipline,” he explained.

Patrizia Kern, chairman of IUMI’s facts and figures committee, went on to describe some of the potential threats that could face global marine re/insurers in the near future.

“There is light economic growth globally with the exception of China; the challenging macroeconomic environment persists, and this is posing a lot of challenges for us,” said Kern. “The ships that are underutilised create overcapacity and increase moral hazard. Lower freight rates mean reduced asset value and increased potential of constructive total loss.

“There is an increasing trend towards claims in a recessionary environment, and the ageing domestic infrastructure of road bridges also has an impact on our plans.”

Kern expressed concern that Solvency II, set to go into force in 2016, would likely extend beyond the EU to jurisdictions such as the US.

“Higher capital requirements for insurers will impact capital management meaning higher costs. With margins under pressure, many activities could no longer become economical. Insurance capacity remains abundant as new capital continues to enter the marine market,” said Kern.

“All line of business are under threat due to these higher capital costs along with all the additional expenses.”

Kern added that the vast surplus of capacity is expected to persist for a number of years, and so there are no signs to suggest that the market will return to its hard state again anytime soon.

She concluded: “The insurance figures will not be received until September and as such there is no update on how worldwide premium volume has developed since the last conference. I am firmly convinced that the figure we show now is very close to representing 100 per cent of the worldwide premium volume.”