The Review reveals that the hull market is unpredictable following the cruise ship disaster in January, with some underwriters in the London insurance market, which will bear the majority of the estimated US$500m hull claim, adamantly refusing premium reductions or even flat renewals. However, unaffected underwriters in the Far East and Scandinavia are more open to negotiations.
Marine liability underwriters meanwhile are hoping the disaster will drive through a general hardening of rates, with many seeking 5% increases going forward.
Cargo insurance buyers continue to enjoy the benefits of a soft market, achieving reductions in both premium and deductibles, as well as increases in limits at little or no additional cost. Despite ever-dwindling returns to insurers, competition for business remains fierce with a flurry of new entrants creating excess capacity.
With no clear resolution in sight, piracy is also having an impact on cargo underwriters. The security measures taken by ship-owners are increasingly effective, with less than 20% of attacks successful during last year. However, this has only served to increase the demands and expectations of those attacks that do occur with total ransoms increasing 77% from 2010.
Alistair Rivers, CEO of Willis Global Marine said, “For many marine insurers the year  began badly with the loss of the ‘Costa Concordia’ cruise liner. It was a timely reminder that 100 years on from the loss of the ‘Titanic’, disasters on this scale are still possible despite all the industrial and technological advancements” , adding that the loss may have stiffened the hull market, although the long term impact is questionable.
“However, a truly hard market is a mirage as long as capital providers are prepared to tolerate marginal returns from their hull and machinery book. These are difficult times for the maritime industry,” he suggested.
The Review describes this years’ February P&I renewals as ‘disproportionately confrontational and protracted’, as ship-owners operating in one of the worst economic environments for a generation contested even inflationary increases. On average, rate increases of 4% were achieved.
Excess capacity in the Asian marine insurance market is putting pressure on rates as local and foreign insurers compete for market share. Asia is now home to around half of the world’s merchant fleet, 14 of the top 20 ports and three of the largest ship building nations.
In the commodity insurance market, underwriters are responding to commodity price volatility by tightening clauses and scrutinising policy wordings with prices edging up for technically unsound risks.