Low oil prices and increased competition create ‘perfect storm’ for marine market
Against a backdrop of competitive renewals, over capacity, rate reductions and plummeting profits, there are growing concerns around the health of the offshore energy market, according to the International Union of Marine Insurance (IUMI).
Speaking at IUMI’s Annual Winter Conference, president Dieter Berg described the combination of lower oil prices and trade production combined with strong competition from the insurance sector and alternative capital as creating a ‘perfect storm’ for the industry.
Berg cited some of economic and political developments that are also exacerbating the situation by potentially slowing globalisation and global trade.
Despite this, he said there was “light at the end of the tunnel”, noting that oil prices are stabilising and the number of working oil rigs is increasing.
Simon Williams, head of marine and energy at Hiscox, suggested that there had definitely been a positive effect on the number of oil rigs going up since Donald Trump was sworn in as president.
Williams said: “In some of the more recent weeks and months, several of the projects that were put on hold in the previous administration have now been given approval."
IUMI’s economic outlook there was both “light and shadow”, the upside being generated by an acceleration in the global economy and a strong US dollar helping exports from Europe and Japan.
However, IUMI is concerned by the increase in global protectionist measures, which Berg suggested is putting globalisation into a crisis.
Berg added: “There is a huge threat to global trade, globalisation and prosperity through a number of protectionist measures throughout the world.
“We have to be very clear on global trade. We have seen since 2011 a stagnation in growth. And in 2015 and 2016 probably a decrease of growth. And for marine insurance this is important because we are depending on export business, and international trade.”
In Europe and the US in particular, Berg said there was an increase in blame being attributed to globalisation for national economic problems, and there was concerns of regarding the surge of nationalism internationally.
Berg continued: “My personal opinion is the liberal trade system is a very important pillar for global prosperity and peaceful cooperation for trading unions, and this is in question at the moment. Many free trade agreements are jeopardised. We will have to see how UK and Europe maintain their trade relationship.”
These “disruptive developments” and the opposition to free global trade and the global exchange of goods Berg said he is convinced would be “disastrous for all of us”.
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