IUMI 2020: Signs of recovery in 2019, but Covid-19 left everything in state of uncertainty: Seltmann

In her presentation to IUMI at the online conference being held instead of the scheduled face to face meeting in Stockholm, Astrid Seltmann, vice-chair and analyst/actuary at CEFOR, said that  losses in the offshore energy sector remained low, with modest or no major impact from the hurricane seasons post Hurricane Ike in 2008. The effects of Hurricane Laura earlier this year were yet to be seen although impact on the offshore sector seemed to be moderate due to prevention measures and a high degree of self-insurance in recent years. Generally, the more recent underwriting years would deteriorate as a result of the backlog in claims assessment and reporting.  

Graham said that uncertainty and fragility prevailed balanced between a low premium income base and a low levels of claims in recent years.


The global premium base for the cargo market for 2019 was reported to be $15.6bn, down 1.5% year on year, said Seltmann. However, exchange rate fluctuations impact most heavily on this sector and so comparisons with earlier years cannot be exact. In addition, one needs to know by how much the amount of cargo being insured had risen or fallen, if one wanted an accurate assessment of how pricing in the market had changed.

Seltmann noted that cargo premiums were strongly correlated with world trade values, but they had lagged behind in recent years. For 2020 Covid-19 had injected significant uncertainty into future world trade forecasts in terms of values, volumes and changing trade patterns. This made it difficult to predict the performance of the cargo market going forward, said Seltmann

Loss ratios in Europe for the years 2014-2016 were particularly high, but all recent years up to 2019 were under the influence of an increasing exposure to nat-cat or man-made events, combined with accumulations on ships and in ports which were not necessarily reflected in premiums, said Seltmann. 2019 started at around 60% which possibly showed a modest improvement compared with previous years. 2019 was expected to end slightly below 70% if the year followed a standard development pattern. Loss ratios in Asia were stable until 2014 but then increased dramatically to around 60% in 2018; there appears to be a slight improvement in 2019 with a loss ratio of around 50%. In Latin America, the ratio is stable in the 50-55% range. Taken together, these loss ratios indicated the beginnings of a market recovery, said Seltmann.

Increasing risk continued to blight this sector, including man-made and naturally occurring incidents. Fires on containerships represented a significant amount of cargo loss in 2019 and has continued into 2020 with a major car carrier and VLCC fire. Accumulation of cargo in stock and in transit has been exacerbated by COVID-19 due to port congestion and delivery delays. This was also increasing the likelihood of damage to vulnerable cargoes such a refrigerated goods, Seltmann said.

Ocean Hull

Global premiums relating to the ocean hull sector were relatively stable. IUMI reported 2019 premiums of $6.9bn, representing a 0.2% increase on the previous year.

However, Seltmann observed that the correlation between the size of the world fleet and the value of global premiums had been diverging (in terms of tonnage) since 2011. The 2019 numbers showed that this unsustainable situation was moderating. Global premiums had stabilized, but the global fleet continued to grow. In general, the age of the world fleet was increasing which was reducing the overall value of the asset base. This, in turn, had the potential to negatively affect premiums.

A long-term downward trend in total losses in ocean hull had continued, reaching an all-time low. However, as with the cargo sector, large vessel fires remained an issue. A major loss incurring unprecedented cost (resulting from increased vessel sizes, accumulations and new trading patterns such as arctic routes) remained a significant risk and one that could impact catastrophically on the hull sector.

COVID-19 had reduced vessel utilization and this has impacted positively on claims since early 2020.

Loss ratios in Europe improved slightly in 2019 but are likely to reach at least 80% once the underwriting year is fully reported. Hull underwriters have endured a technical loss almost every year since 2005. Loss ratios in Asia were slightly improved at just below 70% and the ratio had dropped in the Latin American market to around 60%, said Seltmann.