At the 2017 IUMI conference in Tokyo, the Facts and Figures (F&F) Committee gave its annual update on the macroeconomic environment and shipping market (Donald Harrell, Chair) and the global marine insurance market (Astrid Seltmann, Vice Chair). Stephen Gordon, CEO of Clarksons Research, rounded off the F&F session with an update on the market conditions for shipping, trade and offshore energy.
Seltmann, Analyst/Actuary of the Nordic Association of Marine Insurers (Cefor) as produced an update in the latest edition of IUMI Eye.
The global economy was said to be “generally improving”. However, with many factors impacting global economy and trade, there was still a considerable amount of uncertainty as to how Brexit, a change in national trading policies, financial uncertainties or ongoing conflicts in various parts of the world, would influence future macroeconomic development.
Both the shipping and offshore energy markets were said to have been challenging in 2016. For 2017 there had been “small signs of improvement” such as within the bulker market and the moderate increase in the oil price. IUMI said that it remained to be seen if the recovery continued and what effect this would have on the marine insurance market.
There had been a downward trend in marine underwriting premiums in all lines of business. While the strong US dollar had contributed to this the general weak market conditions played a role in terms of the global economy, commodity prices, and the poor state of the shipping and offshore sectors. The 2015 underwriting year results deteriorated in all lines of business, influenced by major loss events such as the Tianjin explosions and the AMOS-6 satellite. For 2017 the Caribbean hurricanes and Pacific typhoons were expected to impact 2016 and 2017 results negatively.
The cargo sector had been hit significantly in recent years by natural catastrophes such as the Sandy storm and floods, as well as man-made events such as the Tianjin explosions and the AMOS-6 satellite claim. In 2017 there had been various severe hurricanes and typhoons.
In the hull sector, the impact of major losses was moderate in 2016 after a relative strong impact in 2015. The principal trend in recent years had been towards a higher cost of single losses and an increased volatility in the occurrence and cost of such claims. This meant that the volatility in annual insurance results also increased, depending on the (non-)occurrence of major losses.
In combination with deteriorating premium levels, this made achieving sustainable results an ongoing challenge, said IUMI.
In the offshore energy sector, a lack of activity had resulted in a relative benign claims environment in recent years. However, with many offshore assets in lay-up, a current concern was potential claims and their prevention once the reactivation of complex offshore units begins on a larger scale.
Increasing value accumulation and consequently increased potential for new record claims continued to be a major concern (2012: Costa Concordia, Hurricane Sandy, 2015: Tianjin explosions, 2017 hurricanes/typhoons).
On a single-risk basis, ship values had been deteriorating in recent years, particularly in the bulk and supply/offshore sector. While the bulk sector started to recover in 2017, values continued to drop in the offshore sector.
In general, said IUMI, the 2017 market environment remained challenging, with difficult market conditions and the prevailing overcapacity in all marine insurance lines. Changes in regulation, environment and technology are further influencing and changing the industry.