Natural catastrophe-affected marine cargo business was a pocket of significant hardening within the primary insurance market this year, according to the recently published Willis Towers Watson’s Marketplace Realities GB report.
“The unprecedented costs of two Category 4 hurricanes making US landfall, significant hurricane damage throughout the Caribbean, devastating wildfires in California and earthquakes in Mexico provided the impetus to finally address widespread weakness in profitability of many insurance lines” said Clyde Bernstein, head of GB broking.
In marine cargo the price prediction for general cargo non-cat was flat, while for nat-cat rates were plus 5% to –pus 15%.
In London, incumbent cargo insurers were pushing for “as expiry” or rate increases on business exposed to natural catastrophes. In overseas markets, including Lloyd’s Asia there was greater flexibility.
For the general Cargo market the downturn was over, said Willis Towers Watson. For clients not subject to marketing exercises, the broker said that it was seeing many renewals at flat to increased rates, depending on whether clients had nat-cat exposure and their overall loss experience.
Cars – The class had been heavily loss-affected with markets imposing severe rate increases and limitations on coverage.
For Satellites there had been rate increases.
In Commodity Accounts there had been rate increases and certain restrictions of terms (misappropriation).
Willis Towers Watson said that hull insurers were trying to implement underwriting discipline on their existing business while also looking for new opportunities. Some shipowners were prepared to pay extra for insurer continuity, while others were prepared to change insurers to achieve a possible saving or flat premium. More clients were seeking alternative options.
The marine liability market had stabilized and in some cases, hardened following the 2017 catastrophe losses, the broker said.
Unless the exposure justified a risk-adjusted reduction in premium, many buyers would find it difficult to achieve pricing reductions on renewal business without moving to a new insurer.
Ports & Terminals
Ports & Terminal insurers were reviewing rating levels carefully and applying increases for property catastrophe exposures or accounts considered below technical adequacy.
Specie underwriters were reviewing their portfolio carefully, having suffered several major risk losses in the past twelve months in the Jewellers Block and Cash in Transit classes.
These classes were largely unaffected by the 2017 hurricanes, but rates were starting to stabilize and underwriters were now reviewing portfolios more carefully. Some underwriters had pulled out of certain territories for Cash in Transit risks, particularly South America where losses in the first six months of 2017 equalled the total losses experienced throughout 2016.
The Fine Art and General Specie sectors remained profitable for insurers with those insurers writing a balanced book having a greater chance of outperforming the market.
Willis Towers Watson anticipated stricter underwriting-controls in less profitable lines of business, with insurers seeking increases in natural catastrophe regions. There remained ample capacity in the market for Specie risks.
There had been no significant nat-cat upstream losses, but because of the impact of 2017 catastrophes on other classes of business, primary upstream insurers were anticipating that their treaty protections will rise.
Primary energy insurance markets were already trying to pass on increased costs of capital to their customers. Most insurers had restricted their line underwriters to offer a minimum position of ‘flat’ on rates with any rate reductions requiring approval by senior management.
Willis Towers Watson observed that, notwithstanding the above, there was still an abundance of capacity, so, unless there was a major capital-eroding event, market conditions were not likely to change significantly in the medium term. However, capacity for Gulf of Mexico Windstorm might be restricted for 2018, as in some cases a number of markets were transferring aggregate to Onshore Energy, where returns could be maximized.
The satellite insurance market (for launch and in-orbit risks) had seen more than a decade of positive underwriting results, which kept attracting significant market capacity, thus driving down premium rates. There was however, substantial differentiation between the best-performing launch vehicles and those with recent performance issues. For in-orbit risks of healthy satellites, one-year policies were at historical lows. For pre-launch risks, the market remained challenging due to a launch pad explosion that took place in September 2016.
Willis Towers Watson that the scale and durability of a rates recovery overall following last year’s catastrophes was less assured than first envisaged. This had encouraged insurers to focus even more on costs and portfolio management.