20 September 2016 Insurance

Sluggish economic growth prompts marine premiums to plummet

Global marine underwriting premiums for 2015 are down to $29.9 billion, a 10.5 percent reduction from the 2014 figure, according to IUMI’s annual statistical report.

Of this 2015 figure, 50.4 percent of the income had come from Europe, 27.1 percent from Asia Pacific, 9.8 percent from Latin America and 5.9 percent from North America.

With regard to business lines, 52.9 percent of the income had come from transport and cargo, 25 percent from global hull, 15 percent from offshore/energy and 7.1 percent from marine liability.

“Part of the reduction can be attributed to the strong US dollar as compared with other currencies but this is not the whole picture, particularly for hull and offshore energy where much of the original business is written in USD,” said Astrid Seltmann, vice-chairman of IUMI’s facts and figures committee.

“All business lines suffered a real reduction in premium income due, in the main, to a sluggish global economy, low commodity prices and reduced activity, specifically in the offshore sector.”

Compared to 2014’s data for the same period, the technical insurance results deteriorated strongly for cargo, hull and energy sectors.

Within the cargo sector, the premium income reached $15.8 billion for 2015, a 9.1 percent reductions from the 2014 figure, however IUMI suggested the strong US dollar masked the real income number which made it difficult to identify any real market development.

The full effects of the Tianjin explosion, the largest cargo loss ever recorded, on the 2014 and 2015 underwriting years are still unclear.

Looking forward, IUMI expects the risks of costly cargo claims to increase with the increasing accumulation of values in ports and on single vessels, and a higher probability for claims caused by natural catastrophes.

IUMI suggests the 2016 market remains challenging for all lines of business, and although claims reported in the first six months appear to be relatively modest, the potential for a major claim resulting from the increased accumulations risk is always a possibility.

Patrizia Kern-Ferretti, chairman of IUMI’s facts and figures committee said: “Commodity prices are weak and freight rates are low and these persistent soft market conditions are challenging for marine insurers. Uncertainty has also been driven by the increasing and unknown risk of accumulations and a growth in M&A activity across the globe.

“Although we are hopeful that the continuing global economic recovery will strengthen world trade and therefore lend greater support to our sector, marine insurers must adapt to this changing environment if they are to survive and remain effective in the future”

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