The property and casualty (P&C) insurance sector recorded the worst natural catastrophe losses in history in 2017 which has subsequently increased the pressure on marine insurers to improve results.
Damage caused by the hurricanes Harvey, Irma, Nate and Maria, the earthquake in Mexico, monsoons in Bangladesh, storms in Durban and wildfires in California all contributed to the heavy losses.
While marine insurers might not be directly affected by these events, many are part of larger P&C companies which will be ramping up efforts to combat last year’s losses.
Sean Dalton, chair of International Union of Maritime Insurers’ (IUMI) Cargo Committee, said underwriters are being stretched to adapt and improve cargo insurance policies: “The modern cargo policy has been significantly enhanced to include storage extensions, broad policy valuations and coverage provisions such as Control of Damaged Goods that provide for ‘fear of loss’ and ‘brand protection’.
The events of 2017 followed large outlier events in 2016 – the Amos 6 satellite explosion, Tianjin port explosion and the insolvency of Hanjin – which had already weighed heavily on the insurance industry.
The IUMI stated the market is improving and stabilising but remains highly competitive due to the abundance of capacity, and said natural catastrophes are among the many challenges facing the industry.
Other challenges include vessel and port accumulations and larger outlier losses, while there has also been an increase in broker facilities with high commissions and rising expense ratios.
Dalton said cyber security is also a concern: “Most policies remain silent on cyber issues, but the recent Maersk NotPetya attack highlights potential exposures and consequences.
“Policies that raise the greatest potential risks include Freight Forward Liability cover such as NVOCC Legal Liability, Indirect Air Carrier Liability and Errors and Omissions.”
In terms of vessels, the frequency of total losses – whereby a ship is written-off – within the global fleet stabilised at about 0.13%, which the IUMI attributed to improvements in safety, improvements in naval architecture and maritime engineering, and more effective regulation.
However the organisation did warn that increasing vessel sizes bring inherent risk, as does advances in digital applications with regards to “crew training and their ability to manage cutting edge technology and large amounts of data.”
In a statement the IUMI said it is “seeing evidence that the frequency of collisions is increasing, possibly resulting from the introduction of modern technology.”