21 September 2016 Insurance

Marine cargo insurers face reduced premium due to difficult market conditions

A strong US dollar and falling cargo values are the main reasons for the 9 percent reduction in global cargo premiums from 2014 to 2015, according to Nick Derrick, cargo committee chairman for the International Union of Marine Insurance (IUMI).

The total premium value for cargo is sitting at $15.8 billion, with the UK holding the highest market share of 13.3 percent – 8.8 percent at Lloyd’s and 4.5 percent at the International Underwriting Association.

China and Japan retained 9 percent and 8.7 percent market volume, respectively.

Derrick commented: “The statistics show that marine cargo insurers are not making any money. World trade values and exports are down and the slow economic growth has created difficult market conditions. An increase in underwriting capacity is also causing concerns.

“There have been some serious misappropriation incidents in London and the US over the past 12 months which have resulted in substantial potential losses. This level of loss is not sustainable in the long term and misappropriation must be addressed.

“Hianjin Shipping Co filed for court receivership on the 31 August 2016 and there is a worry that other containership companies will follow. This is particularly a concern in Asia as a number of these operators are carrying substantial debt which could cause them a major problem. We are advising our clients to consult their freight forwarders to get the most up-to-date picture.”

Furthermore, the recent explosion of the AMOS-6 satellite that was destroyed following the explosion of the Falcon 9 launch vehicle on September 1 is also likely to impact the cargo market, said Derrick.

He warned that the loss has the potential to affect rates, as the satellite had an insured value of $285 million.

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