Marine

Emerging Issues

Shipping

  • Significant global supply chain issues continue to affect shipping. Container operators are materially impacted, with port delay being a significant risk to their balance sheets.

  • Supply chain issues are leading to a surge in vertical integration.

  • There is significant pressure in the industry to embrace the requirements of an ESG framework.

  • The recruitment and retention of senior and junior crew is of utmost importance and is proving a challenge as the talent war intensifies.

  • Social media has created an environment where adverse incidents are immediately broadcast around the world. This has significant brand and reputational implications.

  • Geopolitical Risk is increasing as key shipping routes are impacted by a challenging political environment.

  • The cost of dealing with shipping losses is increasing, which will inevitably put pressure on insurance premiums.

Ports & Terminals

  • The larger global ports are at the forefront of the current global supply chain issues. Port delays, empty containers and staff shortages are just a few of the issues being faced.

  • Smaller ports are engaged in dredging, etc. to allow them to deal with the larger and larger vessels.

  • Technology continues to drive efficiencies across the sector with Electronic Bills of Lading here to stay.

Cargo Owners

  • Cargo owners are experiencing significant challenges related to supply chain issues and an increase in Natural Catastrophe incidents.

  • The cost of moving goods has increased dramatically during 2021 and shows no sign of abating.

  • COVID issues and staff shortages have adversely affected global supply chains, severely testing the Just in Time approach.

Logistics

  • The shortage of drivers across the world is being felt more than at any time previously.

  • The global supply chain disruption is having a material impact on the Logistics industry.

  • Technology continues to be seen as the solution to driver shortage and stock/warehouse management. This brings its own risks as Cyber incidents are also increasing significantly across the sector.

  • Last-mile deliveries have boomed throughout the pandemic and the buying patterns of consumers have likely changed forever – creating positive impacts on the logistics industry

Insurance Market Conditions

Rates

  • Shipping risks are experiencing a deceleration of hard market conditions and insurers are adjusting their plans and forecasts accordingly.

  • The ever-increasing cost of P&I claims is driving insurance premium increases due to various factors, including: governments and authorities punitively penalising shipowners for incidents, technological advancement permitting increasingly expensive wreck removals; and a concerning trend of governments trying to break limitation to which their country has signed.

  • The Marine Ports and Terminals / Liability market continues to experience challenging trading conditions with material rate increases on clean business, and more significant adjustments on poor performing risks.

  • The Cargo market continues to push for double digit rate increases, particularly on risks with significant CAT exposures, although increases are decelerating throughout 2021. New insurers can be more competitive than incumbents, dependent on type of commodity, loss history and CAT profile, but new pricing is still an increase over expiring.

  • Logistics risks are experiencing year three of hard market conditions. Insurers costs continue to rise on their reinsurance treaties so they are pressured to match or beat their rate increases.

Undewriting Appetite

  • Some Shipping risk insurers remain constrained by the early parameters that were established to return to profitability, meaning that new entrants to the market have been able to deploy capacity quickly and capitalise on the opportunity to grow without tough competition from the wider market. As a result, these new entrants have all established themselves as key market leaders. Now, the wider market is focused on retaining business while sustaining the market increases that took place over the past three years.

  • While P&I retentions remained stable at the 2021 renewal and the individual club retention is expected to remain stable at the February 2022 renewal, the International Group pooling system and reinsurance placement are under pressure, and other fundamental changes may transpire at the coming renewal.

  • Remediation of the Cargo book has driven underwriters to remove/exclude a lot of coverages that were added during the soft market. As the bulk of the exclusions were applied in 2019 and 2020, this year brought very little change in underwriting approaches.

Capacity, Limits, Deductibles & Coverages

  • The new Shipping capacity that entered the London Marine market in 2021 is making an impact, allowing some movement, particularly on verticalized placements, which has improved pricing and reduced the need for verticalization. Additional impacts are expected through the remainder of the 2021 and early 2022 renewal season.

  • Cargo capacity is expanding following two years of material pricing adjustments. Stock Throughput capacity remains stable. The number of insurers willing to entertain retail stock throughputs or stock throughputs for temperature-controlled goods remains limited.
  • Stock Throughput underwriters continue to underwrite rigorously, increasing rate and deductibles and adding Communicable Disease Exclusions to placements that do not already include them. Retail stock throughputs and stock throughputs for temperature sensitive goods are experiencing challenging market conditions, including limited appetite. Insurers are growth-focused and are competing risks with favorable loss histories, lower risk commodities and relatively low CAT risk profiles.

  • In the Logistics market segment, capacity remains constrained, and there is insufficient competition

What to Expect at Renewal

Shipping

  • The deceleration of hard market conditions will be felt the most by well-performing Marine sectors. For distressed business or out-of-favour tonnage, the market is expected to remain challenging, as insurers participating in this space continue to offer opportunistic pricing while available capacity remains constrained.

  • Market conditions are expected to become more favorable over the next 18 months, as insurer underwriting restrictions are lifted and appetite expands.

  • The US Brown Water Hull/P&I market is expected to continue to experience relatively modest rate increases – up to 10% on clean business, with loss-active risks seeing more significant increases.

  • Overall, competitive renewal terms can be achieved, particularly on risks that have not been recently marketed. This is a change from 2020, when underwriting was more conservative and there was less focus on growth.

Protection & Indemnity

  • Favorable risks with comprehensive safety procedures are expected to experience strong competition and flat to moderate increases at renewal. Some insurers may consider price and term improvements in exchange for the deployment of safety technology on job sites. Contractors with unfavorable loss history will likely experience rate increases.

  • Auto Liability rates and excess attachment points will continue to be an industry-wide challenge, particularly for contractors.

  • Social inflation will continue to be an issue underwriters watch carefully.

Cargo Owners

  • After a period of hard market conditions, dynamics are expected to continue to stabilize, with a focus on growth.

  • Rate increase momentum is expected to continue decelerating as insurers look to satisfy budgets in a market where capacity has been on the rise.

Port & Terminal

  • The Marine Ports and Terminals / Liability market continues to experience challenging trading conditions and underwriters are likely to apply corrections to deductibles or retention structures in order to proceed with renewals. .

  • Verticalization, and a requirement for reputable lead insurers, is expected to continue on many programs in order to achieve a 100% tower limits.

Logistics

  • The market remains hard although conditions have started to decelerate. A continued deceleration is expected.

  • Capacity remains constrained but further retractions are not expected. Rates are at a point where they are expected to attract new entrants, bringing much needed competition to this space.

  • Underwriting rigor will continue, with underwriters asking for information not previously required, making the underwriting process slow and onerous.

  • To combat the impact of rate increases, insureds may continue to explore limits and deductibles options help offset rate increases.

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