July 25, 2005
Marine insurers worried by softer rates
The marine insurance market is once again at a critical point in the current underwriting cycle, says the International Union of Marine Insurance (IUMI).
The boom in shipping markets has attracted new players to the international insurance market, bringing the threat of more aggressive underwriting and further softening of what is already a fragile pricing environment, says the IUMI. At the same time, there is a discernible upward swing in the claims graph, notably collisions, partly reflecting owners' greater utilization of their vessels to take advantage of peak freight rates.
The IUMI sees a danger of "the stable market that has been nurtured over the last few years starting to falter."
Hull and machinery underwriters, who have suffered an aggregate loss for the past eight years, are particularly concerned, says IUMI. Generally, they have not been able to take advantage of shipowners' good fortune, and rates are now slipping again from levels that were already unsatisfactory.
Rates have softened dramatically in the offshore energy market despite the claims arising from Hurricane Ivan in 2004.
In the cargo market, underwriters have been able to maintain a reasonable level of profitability; but increased accumulations of exposure that cargo underwriters are currently facing requires an even more accurate assessment of risks.
Meanwhile, the latest package of EU maritime safety legislation, known as 'Erika 3', is due to go to the European Commission in mid-September after a series of delays, which may bring some changes in the marine liability insurance sector.
These factors mean that this year there will be a much sharper focus on the annual IUMI conference, being held in Amsterdam, September 18-21.
Patrick de La Morinerie, the Paris-based president of IUMI, said today: "Traditionally, IUMI meets in September, the same month as the reinsurers meet in Monte Carlo. Although IUMI does not discuss premium rates, it provides a vital forum and sounding-board in advance of the important renewal season that opens towards the end of the year.
"Marine underwriters in the major markets will be analyzing trends and figures and trying to project ahead over the next 12 months or so," he said.
Mr de La Morinerie, who is deputy CEO of AXA Corporate Solutions and head of its marine and aviation division, said that, looking ahead, a particularly worrying issue is the repair situation. There could be a possible flood of claims when the shipping boom turns down and ships which have been kept in service for long periods and possibly have missed scheduled maintenance and surveys are drydocked.
"There are signs that the boom may be at least partly over," he said."We know that many owners are already urgently researching drydock availability, which could be a big problem as many repair yards have switched to newbuilding.