Marine insurance markets under pressure, but global economy shows some signs of recovery
At the 2017 IUMI conference in Tokyo, the Facts and Figures (F&F) Committee set the scene on the Monday morning for the subsequent workshops with its annual update on the macroeconomic environment and shipping market (Donald Harrell, Chair) and the global marine insurance market (Astrid Seltmann, Vice Chair).
The third speaker, Stephen Gordon, CEO of Clarksons Research, rounded off the F&F session with an excellent update on the market conditions for shipping, trade and offshore energy.
Facts & Figures Committee work
The core of the committee’s work remains the production of the well-established extensive annual statistics, published each spring and autumn. In addition, the committee is working on establishing a major claims database providing data on carriers’ and marine liabilities, exploring new opportunities by strengthening its partnership with established and new data providers; extending its global and local reach by securing a broad spread of knowledge within the committee in terms of geography and specific areas of competence.
Economy and Trade
The global economy is generally improving and shows a recent positive trend. However, with many factors impacting global economy and trade, there is still a considerable amount of uncertainty as to how Brexit, a change in national trading policies, financial uncertainties or ongoing conflicts in various parts of the world, will influence the future macroeconomic development.
Shipping and offshore energy markets
Both the shipping and offshore energy markets were challenging in 2016. In 2017, there are small signs of improvement such as within the bulker market and the moderate increase in the oil price. It remains to be seen if the recovery continues and what effect this will have on the marine insurance market.
The global marine insurance market
Premiums: There has been a downward trend in marine underwriting premiums in all lines of business. While the strong US dollar contributes to this, when comparing it to other currencies, the general weak market conditions play a role in terms of the global economy, commodity prices, and the poor state of the shipping and offshore sectors.
Technical results: The 2015 underwriting year results deteriorated in all lines of business, influenced by major loss events such as the Tianjin explosions and the AMOS-6 satellite, the full effect of which was not known a year ago. For 2017, the Caribbean hurricanes and Pacific typhoons are expected to impact 2016 and 2017 results negatively.
Claims: The cargo sector has been hit significantly in recent years by natural catastrophes such as the Sandy storm and floods, as well as man-made events such as the Tianjin explosions and the AMOS-6 satellite claim. In 2017, there have been various severe hurricanes and typhoons.
In the hull sector, the impact of major losses was moderate in 2016 after a relative strong impact in 2015. The principal trend in recent years is towards a higher cost of single losses and an increased volatility in the occurrence and cost of such claims. As a result, the volatility in annual insurance results also increases, depending on the (non-)occurrence of major losses. In combination with deteriorating premium levels, this makes achieving sustainable results an ongoing challenge.
In the offshore energy sector, the lack of activity resulted in a relative benign claims environment in recent years. However, with many offshore assets in lay-up, a current concern is potential claims and their prevention once the reactivation of complex offshore units begins on a larger scale.
Values: Increasing value accumulation (ports, larger high-value vessels) and consequently increased potential for new record claims continues to be a major concern (2012: Costa Concordia, Hurricane Sandy, 2015: Tianjin explosions, 2017 hurricanes/typhoons). On a single-risk basis, ship values were deteriorating in recent years, and particularly for the bulk and supply/offshore sector. While the bulk sector started to recover in 2017, values continued to drop in the offshore sector.
In general, the 2017 market environment remains challenging, with difficult market conditions and the prevailing overcapacity in all marine insurance lines. Changes in regulation, environment and technology are further influencing and changing the industry.
For more insight please look at the Facts and Figures conference publications published here:
Facts & Figures press release: https://iumi.com/news/press-releases/global-marine-underwriting-premiums-continue-to-fall-reports-iumi
Report on Merchant fleet and world trade (Donald Harrell): http://iumi2017.com/pdf/programme/sep18/1120-1300_Workshop_Facts_Figures/1120-1150_Don_Harrell/11_Mr_Don_Harrell_PP.pdf
Global Marine Insurance Report (Astrid Seltmann): http://iumi2017.com/pdf/programme/sep18/1155-1230_Astrid_Seltmann.pdf
Tables with marine premiums by country and loss ratio triangulations for cargo, hull and offshore insurance are available for IUMI members from https://iumi.com/statistics .
Shipping & Trade, Offshore & Energy-a Market Outlook (Stephen Gordon):
In addition to the conference presentations, the Facts and Figures Committee provides the marine insurance industry with extensive up-to-date key indicators published in spring and autumn each year, which IUMI members can download from https://iumi.com/statistics.