The increased risk of large, more complex and costly claims has the potential to impact all marine underwriting sectors in 2019 according to the International Union of Maritime Insurance (IUMI).
Whilst in general, major losses remain stable, the continued erosion of the global premium base means that attritional losses are becoming much more significant, it noted.
Sean Dalton, chair of IUMI’s cargo committee, said: “Global cargo marine insurance has been unprofitable for a number of years – historically it was one of the most profitable lines of marine insurance. Whilst there are regional variations, on a global basis, premiums are not technically adequate to cover losses and expenses. This is major concern.
“Going forward, we see the main challenges will include larger and more complex risks, natural catastrophes (Nat cats), and unknown vessel and port accumulations. We are also seeing an increasing gap in underwriters’ technical competencies. For many years, accounts have been largely underwritten and priced on loss experience with less attention paid to exposures which have now grown in size and complexity. Coverage has also broadened significantly.”
Nat cat losses in 2018 were lower than in 2017 but were significant nonetheless and included hurricanes Florence, Michael and typhoon Jebi. The fire on Maersk Honam in March 2018 is likely to be the largest General Average loss in history.
Of growing concern to the IUMI is the recent spate of shipboard fires including Sincerity Ace, Yantian Express, APL Vancouver, ER Kobe and Grimaldi Grande America.
Whilst the union was reluctant to speculate on the causes of these fires, it pointed out that past issues such as cargo mis-declaration, improper packing, loading, labelling and shipping of hazardous cargoes are likely to be factors.
Other significant issues have included loss of containers overboard, notably the 300 boxes lost from MSC Zoe in the North Sea.
Rama Chandran, chairman of IUMI’s ocean hull committee, stated: “Going forward, our main concerns continue to be the accumulation of risks associated with large container vessels and, in particular, the risk of onboard fires.
“We are also focused on advances in digital technology – both in naval architecture and in vessel operations – and the ability of seafarers to effectively manage cutting edge technology and growing amounts of data. We are also likely to see increased machinery claims resulting from the 2020 sulphur limit.”