APAC marine and energy offers a ‘diversifier within a diversifier’: Gallagher Re

Asia-Pacific marine and energy is profitable, growing strongly and offers an attractive diversifier for carriers, argues Gallagher Re senior broker Matthew Laino.

Key points:
Coverage mix sets APAC apart
Treaty lead capacity increases
Renewables need specialist backing

Asia-Pacific marine and energy reinsurance has emerged as a resilient, profitable, relative haven for global capital, somewhat shielded from the conflict-related losses that weigh on London’s composite specialty market. As such, capacity is plentiful as it chases profitable growth in the region.

That is according to Matthew Laino, senior broker, marine, at Gallagher Re in Asia-Pacific. He told SIRC Today that cedants in Asia have been able to avoid some of the challenges facing books of business in London.

“In Asia-Pacific, we are in a different position to the London market,” Laino said. “Cedants based in London are often buying not just marine reinsurance towers and proportional treaties but much wider forms of coverage.

“They’re buying composite coverages that include upstream and downstream energy, war, political violence, terrorism – and even aviation war, which has had a difficult run over the last few years.”

It is not that Asia-Pacific is unaffected by the conflicts in the Middle East; it is just easier for regional cedents to avoid the direct brunt of those losses. As such, capacity is attracted to the region.

“For the marine reinsurance market in Asia, there is still an abundance of capacity, continued strong performance,” Laino said. “There’s growth in the underlying markets for marine cargo, marine hull and renewables, and even upstream energy, which is a part of our remit.”

For Gallagher Re, that performance provides a foundation for client differentiation. Laino says demand for Asia-Pacific marine business reflects carriers’ desire to diversify their portfolios. “In that sense, marine and energy in Asia represents a diversifier within a diversifier for carriers.”

Trade resilience 

The commercial foundations of the portfolio have also proved far more durable than some anticipated. Concerns that US tariffs on exporters in Vietnam, China, Cambodia and Laos would replicate pandemic-era disruption have not materialised.

“Trade flows have been extraordinarily resilient and adaptive,” Laino said. Cargo and hull premium volumes continue to grow without the same level of port disruption seen during Covid-19. Citing IUMI statistics, Laino expects Asia could surpass Europe as the world’s largest marine cargo premium market within 24 months.

That volume expansion coincides with softening direct rates across hull, cargo and upstream energy. Because many regional clients purchase proportional reinsurance, Laino notes that primary rate reductions may also be reflected in treaty programmes over time.

At the same time, market capacity is developing. In Singapore, several marine-focused managing general agents have launched over the past 18 months, bringing experienced underwriting teams with established local relationships into the direct market.

In treaty reinsurance, lead capacity serving the market has broadened, moving past the deference to incumbent leaders seen post-pandemic. “There’s certainly been growth in that,” Laino said, expecting the expansion to yield “continued competition and results for our clients.”

“Carriers want exposure to Asia as a diversifying part of their portfolio.”

Specialist demand 

That expanding capacity does not diminish the need for technical discipline. “Ultimately, our clients who are marine and energy underwriters want to be interacting with marine and energy specialist treaty reinsurers,” Laino said, adding that he believes general property/casualty reinsurers would defer to their own specialist teams.

The demands of war underwriting underscore why specialist depth is essential to maintaining regional performance. “You can’t just be someone sitting at a box with a pen,” Laino said. “You’ve got to be able to deeply interrogate the risk. You’ve got to know every single link in the chain.”

Underwriters must also navigate an evolving sanctions environment that can change with the strike of a pen or a social media post, while a major war loss in the Strait of Hormuz could require complex engagement with security advisers, investigators and governments. In that environment, he notes, underwriters rely heavily on brokers who maintain trusted relationships throughout the maritime chain.

Technical specialisation is equally critical as regional demand broadens into offshore wind and other onshore and offshore renewables, covering power and engineering risks. Middle Eastern supply instability has emphasised the region’s baseload reliance on fossil fuels. Laino believes the conflict will accelerate renewable development in Asia-Pacific.

Rather than relying on international open markets to absorb those evolving assets, he argues that regional cedants need treaty backing to build local underwriting capacity. “We need to be supporting our cedants where they can develop their own in-house expertise and support those with treaty solutions,” he said.

Matthew Laino is a senior broker, marine, at Gallagher Re in APAC. He can be contacted at: Matthew_Laino@gallagherre.com 

For more news from SIRC Today, click here.

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.