Marine P&I reinsurance rates taper at renewal despite feared losses
The marine liability reinsurance market is showing “signs that the level of rate increase is tapering” despite a shortfall of new capacity and threat of several large losses.
“We are starting to see the minimum level of [rate] rise taper off and, dependent upon a number of factors, even single figure rises for some accounts being achieved,” analysts at the Miller brokerage said of the February P&I reinsurance renewal season.
Rate growth on average since early 2021 has run neighbourhood 12.5 to 15%, but with an increased sense of differentiation in the market allowing the preferred exposures to slip into the high single digits.
“Notwithstanding the possible differentiation, underwriters continued in their requirement for real rate rises across the board, with reductions still not possible,” analysts wrote.
Pricing sentiment in the market may be splitting as the market enters “a transitional phase” with a majority of markets “comfortable” with the current rate of rate inflation and a “small number” seeking more.
Pricing structures should continue to press reinsureds into higher retentions towards better risk selection, analysts added.
A number of potential large losses are on hand to offer some push-back. The “Felicity Ace” car carrier that sunk March 1, the Repsol oil spill in Callao, Peru in mid-January and a lawsuit following a 2020 incident onboard the Transocean drillship, “Deepwater Asgard” in the US Gulf of Mexico “could evolve into large reinsurance losses.”
The Russian invasion of Ukraine and ensuing risks for the Black Sea are unlikely to add to the list of concerns given the drop-off in regional commercial shipping already seen, analysts wrote.
Capacity has remained stagnant from incumbents and only the newest vintage of market players has offered any substitute capacity, Miller claimed. Reinsurers from the class of 2021 are “starting to apply some pressure to incumbent markets” but are also often the more aggressive on rate demands.
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