Global marine premiums were $28.5 billion
in 2017, up by two per cent from 2016, the International Union of
Marine Insurance (IUMI) has reported.
in 2017, up by two per cent from 2016, the International Union of
Marine Insurance (IUMI) has reported.
In its annual statistical report on the
marine insurance market, IUMI said that, despite the increase, there had
been an increasing mismatch between income levels and covered risk.
marine insurance market, IUMI said that, despite the increase, there had
been an increasing mismatch between income levels and covered risk.
This is when current premium levels are viewed in relation to covered risks and the impact of claims.
In the hull market, falling vessel values
have, among other market conditions, contributed to an erosion of
income to a degree where income is now not sufficient to allow for
normal repair costs in a given year.
have, among other market conditions, contributed to an erosion of
income to a degree where income is now not sufficient to allow for
normal repair costs in a given year.
The last 10 years’ statistics show an
increasing volatility in the impact of claims on underwriting results
caused by the random occurrence of claims with unprecedented cost.
increasing volatility in the impact of claims on underwriting results
caused by the random occurrence of claims with unprecedented cost.
As vessel sizes continue to increase,
this trend will not reverse, says the IUMI, and the heightened risk must
be taken into account. The shipping and insurance industries will have
to embrace this level of volatility and uncertainty
which may impact future profitability.
this trend will not reverse, says the IUMI, and the heightened risk must
be taken into account. The shipping and insurance industries will have
to embrace this level of volatility and uncertainty
which may impact future profitability.
The offshore energy market has also seen a
substantial erosion of premium income caused by the low oil price and
the consequent low activity in the offshore sector.
substantial erosion of premium income caused by the low oil price and
the consequent low activity in the offshore sector.
The distribution of the $28.5 billion
global income between geographic regions remained stable, with only a
one percent increase in the share of Asia and Latin America as compared
with Europe.
global income between geographic regions remained stable, with only a
one percent increase in the share of Asia and Latin America as compared
with Europe.
In 2017, Europe represented 49 percent of
the global income, Asia/Pacific 29 percent, Latin America 10 percent,
North America six percent, Middle East four percent and Africa 2.4
percent.
the global income, Asia/Pacific 29 percent, Latin America 10 percent,
North America six percent, Middle East four percent and Africa 2.4
percent.
For global marine premium by line of
business, cargo continued to represent the largest share with 57 percent
in 2017, hull 24 percent, offshore energy 12 percent and marine
liability (other than P&I) seven percent.
business, cargo continued to represent the largest share with 57 percent
in 2017, hull 24 percent, offshore energy 12 percent and marine
liability (other than P&I) seven percent.
Cargo sector
Premium income for marine cargo insurance
was estimated at $16.1 billion for 2017, representing a six percent
increase on the 2016 result. Cargo was the only line with an actual
increase in volume and, consequently, its relative
share of the overall global premium. This increase in absolute numbers
was the result of an upswing in trade in combination with exchange rate
fluctuations (which affect cargo premiums more strongly than other
sectors).
was estimated at $16.1 billion for 2017, representing a six percent
increase on the 2016 result. Cargo was the only line with an actual
increase in volume and, consequently, its relative
share of the overall global premium. This increase in absolute numbers
was the result of an upswing in trade in combination with exchange rate
fluctuations (which affect cargo premiums more strongly than other
sectors).
2014-2016 showed an extraordinary
increase in loss ratios, primarily caused by the impact of outlier and
national catastrophe (nat-cat) losses. Seen in the context of increasing
accumulation exposure and climate change, the IMUI
says that this might indicate a “new normal.”
increase in loss ratios, primarily caused by the impact of outlier and
national catastrophe (nat-cat) losses. Seen in the context of increasing
accumulation exposure and climate change, the IMUI
says that this might indicate a “new normal.”
2017 continues this recent trend and is
expected to be affected more than average due to a number of nat-cat
events including hurricanes, the Mexican earthquake, flooding in
Bangladesh and the Californian wildfires. Underwriting
year results always deteriorate due to the lag in registering and
paying claims. When all claims attaching to the 2017 underwriting year
are known, a final gross loss ratio of around 80 percent is likely to be
reported.
expected to be affected more than average due to a number of nat-cat
events including hurricanes, the Mexican earthquake, flooding in
Bangladesh and the Californian wildfires. Underwriting
year results always deteriorate due to the lag in registering and
paying claims. When all claims attaching to the 2017 underwriting year
are known, a final gross loss ratio of around 80 percent is likely to be
reported.
Hull sector
The hull sector recorded a global
underwriting income of $6.9 billion representing a decrease of 2.3
percent on the 2016 result. Exchange rates exert less influence on the
hull market due to the global nature of the hull portfolio.
The downward trend in global hull premiums appears more severe when
compared against world fleet numbers and vessel values. Whilst the
global fleet continues to grow in numbers and in average vessel sizes,
the average insured values have reduced year-on-year
since the financial crash of 2008. This, together with depressed
freight rates, is affecting overall premium income. 2017 saw a slight
rally in vessel values in the bulk market and 2018 is likely to see
values increase for the offshore fleet but, in the main,
IUMI’s figures show an increasing mismatch between fleet growth and
premium income.
underwriting income of $6.9 billion representing a decrease of 2.3
percent on the 2016 result. Exchange rates exert less influence on the
hull market due to the global nature of the hull portfolio.
The downward trend in global hull premiums appears more severe when
compared against world fleet numbers and vessel values. Whilst the
global fleet continues to grow in numbers and in average vessel sizes,
the average insured values have reduced year-on-year
since the financial crash of 2008. This, together with depressed
freight rates, is affecting overall premium income. 2017 saw a slight
rally in vessel values in the bulk market and 2018 is likely to see
values increase for the offshore fleet but, in the main,
IUMI’s figures show an increasing mismatch between fleet growth and
premium income.
There continues to be a long-term
downward trend in the frequency of hull claims in general and for total
losses specifically. The frequency of total losses seems to have reached
its possible minimum with a recent fluctuation
between 0.05 – 0.1 percent. The reduction in vessel values increases
the probability of constructive total losses as the cost of repair is
more likely to exceed an accepted percentage of the reduced vessel
value.
downward trend in the frequency of hull claims in general and for total
losses specifically. The frequency of total losses seems to have reached
its possible minimum with a recent fluctuation
between 0.05 – 0.1 percent. The reduction in vessel values increases
the probability of constructive total losses as the cost of repair is
more likely to exceed an accepted percentage of the reduced vessel
value.
Major losses have not significantly
impacted the sector for some years, but as the annual statistics
released by The Nordic Association of Marine Insurers (Cefor) in April
2018 illustrate, the most costly one percent of all claims
account for a minimum of 30 percent of the total claims cost in any
given year. Moreover, the risk of a single major loss incurring
unprecedented cost remains significant in light of larger and more
sophisticated vessels entering the market and new, more risky
trading areas such as polar waters being exploited.
impacted the sector for some years, but as the annual statistics
released by The Nordic Association of Marine Insurers (Cefor) in April
2018 illustrate, the most costly one percent of all claims
account for a minimum of 30 percent of the total claims cost in any
given year. Moreover, the risk of a single major loss incurring
unprecedented cost remains significant in light of larger and more
sophisticated vessels entering the market and new, more risky
trading areas such as polar waters being exploited.
The rise in loss ratios clearly shows an
increasing gap between a declining income and expected claims cost, even
without the impact of costly major losses. This is a significant cause
for concern, says the IUMI.
increasing gap between a declining income and expected claims cost, even
without the impact of costly major losses. This is a significant cause
for concern, says the IUMI.
Offshore energy
Global premiums for the offshore energy
sector reached USD 3.5 billion in 2017 representing a five percent
reduction on 2016. The reduction from 2016 to 2015 reached 21 percent.
The majority of business in this sector is transacted
in U.S. dollars, so exchange rate fluctuations have very little impact.
The strong decrease in income from 2014 driven by the falling oil price
now appears to be flattening out as the oil price begins to rally.
sector reached USD 3.5 billion in 2017 representing a five percent
reduction on 2016. The reduction from 2016 to 2015 reached 21 percent.
The majority of business in this sector is transacted
in U.S. dollars, so exchange rate fluctuations have very little impact.
The strong decrease in income from 2014 driven by the falling oil price
now appears to be flattening out as the oil price begins to rally.
Losses in this sector, particularly from
hurricanes, have been modest in recent years with 2017 recording just
two upstream losses valued at more than $1 million.
hurricanes, have been modest in recent years with 2017 recording just
two upstream losses valued at more than $1 million.
Note from the IUMI
The IUMI’s total world-wide premium
includes data from all relevant marine insurance markets including Asia,
Latin America and Africa. Care should be taken when making comparisons
with earlier figures as data coverage varies in
different years and a number of figures will be updated
retrospectively. Similarly, “global” loss ratios for hull, energy and
cargo do not encompass all regions, and underwriting year results do
develop over a couple of years due to a time lag in claims reporting
and payments. Since 2017, the IUMI has been able to show accounting
year loss ratios originating from major Asian and Latin American
markets, in addition to the underwriting year loss ratios reported from
primarily major European marine insurance markets.
When interpreting statistics, caution should always be applied
regarding what the data actually relates to. The aim of the IUMI is
solely to provide data as available and raise awareness for the
importance of a critical evaluation of the risks covered.
includes data from all relevant marine insurance markets including Asia,
Latin America and Africa. Care should be taken when making comparisons
with earlier figures as data coverage varies in
different years and a number of figures will be updated
retrospectively. Similarly, “global” loss ratios for hull, energy and
cargo do not encompass all regions, and underwriting year results do
develop over a couple of years due to a time lag in claims reporting
and payments. Since 2017, the IUMI has been able to show accounting
year loss ratios originating from major Asian and Latin American
markets, in addition to the underwriting year loss ratios reported from
primarily major European marine insurance markets.
When interpreting statistics, caution should always be applied
regarding what the data actually relates to. The aim of the IUMI is
solely to provide data as available and raise awareness for the
importance of a critical evaluation of the risks covered.
