Insurer Lancashire Holdings cut its marine division gross written premiums in 2016 compared with 2015, reducing them to $37.2m, from $47.6m. In percentage terms of total GWP the decline was from 7.4% to 5.9%.
Lloyd’s GWP in marine cargo (not included in the above figure) was $21.2m, down from $29.6m in 2015, just under 10% of its total Lloyd’s business of $215.0m in GWP in 2016.
Lancashire’s marine cargo at Lloyd’s is an international account and is written either on a direct basis or by way of reinsurance. It covers the re/insurance of commodities or goods in transit. Typically, transit cover is provided on an all-risks basis for marine perils for the full value of the goods concerned, although higher value or capacity business may be written on a layered basis. Static cover is also provided for losses to cargo, from both elemental and non-elemental causes, whilst static at points along its route. In addition, the cargo account can include specie and fine art, vault risks, artwork on exhibition and marine war business relating to cargo in transit.
In marine, hull and total loss contributed $13.1m in GWP, down from $19.9m the year before. Marine builders’ risk GWP was $8.7m, up from $6.5m in 2015. P&I business fell sharply, to $8.4m, from $13m the previous year. Marine hull war dropped to $4.1m in GWP, from $6.0m in 2015. Other marine grew to $2.9m in GWP, from $2.2m.
With the exception of the P&I clubs business, which is excess layer mostly as reinsurance of the IG, the majority of Lancashire marine policies are written on a ground-up basis. Marine hull and total loss is generally written on a direct basis and covers marine risks on a worldwide basis, primarily for physical damage. Marine builders’ risk covers the building of ocean going vessels and their testing and commissioning. Marine hull war is mostly direct insurance of loss of vessels from war, piracy or terrorist attack, with a very limited amount of facultative reinsurance.
The largest expected exposure in the marine class is from physical loss rather than from elemental loss events, although there is exposure to elemental perils and to the costs for removal of wreck.
Lancashire said that reinsurance may be purchased to reduce its exposure to both large risk losses and to accumulative attritional losses. Reinsurance is typically purchased on a treaty excess of loss basis.
Lancashire said that there had been “some adverse development on prior accident year marine and energy claims during the year”, although positive development for the group as a whole was $85.8m.
The insurer reported total GWP of $633.9m, down fractionally from the $641.1m. Taking advantage of the soft reinsurance market, its outward reinsurance premiums rose to $175.2m, from $159.4m. Profit for the year declined to $154.3m, from $181.7m.