Marine insurers are welcoming an increase in average premiums, but challenges remain, including rising repair costs and the persistent risk of container fires.
The International Union of Marine Insurers (IUMI) reports that marine insurance premiums were up more than six percent in 2021, rising to $33 billion for the year – a welcome improvement for a sector that has been challenged by the cost of rising claims in recent years. The premium increase was driven by rising trade volumes, a stronger dollar, a rebound in the offshore sector and higher vessel values. However, there are still challenges to navigate ahead.
“Marine underwriters are navigating some extremely complex issues,” said Vice-Chair of IUMI’s Facts & Figures Committee Astrid Seltmann. “We are reporting this data at a time when several shocks have hit a world economy already weakened by the pandemic. There is no end in sight for the war in Ukraine, soaring global energy costs and inflation, a gloomy outlook for trade and the possibility of further climate and pandemic related disruptions.”
Hull & machinery insurers are concerned about deteriorating loss ratios and the long-term sustainability of their sector, according to Ocean Hull Committee Chairperson Rama Chandran. The H&M sector saw a premium base increase of about four percent in 2021 and six percent in 2020, reversing eight years of steady decline – but the pace of improvement has slackened. “This is likely due to increased market capacity, particularly from London and Latin America which is a surprise for many,” Chandran said.
Chandran noted that containership fires remain a concern for hull, cargo and P&I insurers alike, and that the main cause still appears to be misdeclared dangerous goods. But a rising number of engine room fires pose a new cause for concern, and may require looking more closely at training and new technology.
Meanwhile, the cost of repairs for damaged vessels has risen due to inflation: costs for labor, spare parts and steel have all gone up, which means more expensive claims for H&M insurers.
In contast, cargo insurers have been doing well, recording a premium increase of eight percent in 2021 and an overall improvement in loss ratios. Cargo premiums were up in most markets, with China leading the pack. “However, the industry is still facing headwinds as the global supply chain remains volatile and is still dealing with the aftershock of the pandemic while now adding inflationary pressures to the mix,” noted Isabelle Therrien, Chairperson of the IUMI Cargo Committee.