Outlook for marine cargo insurance challenging, but opportunities remain for underwriters, says IUMI

Marine cargo remained the largest commercial marine line of business in 2017, with global cargo premium reaching $16.1bn, reported Sean Dalton as cargo committee chair of IUMI at the 2018 conference, held in Cape Town.

Globally, the cargo line had been unprofitable for several years, with rising loss ratios and expense ratios, and this was of great concern to underwriters.

Dalton said that growth in global merchandise trade was expected to remain strong in 2018 and 2019. This was positive for cargo marine insurers, but the continued growth would depend on various factors, political and economic, and there were some serious concerns. An increasing number of countries were restricting or restraining international trade and this was creating a protectionist operating environment.

Hurricanes Harvey, Irma and Maria all caused cargo losses, particularly with an increase in static risk cover. “The cargo insurance market is starting to firm but it still has a way to go. Many cargo accounts were severely affected by events in 2017; and 2018 looks set to be another very active year”, he said, adding that “nat-cats and large/outlier losses, such as the Tianjin port explosion in 2016, have demonstrated the need for the cargo market to price realistically for such losses and develop risk adequate premiums.”

Dalton said that this was not the end of the threats facing cargo cover. “Containership fires and the increasing occurrence of misdeclared cargoes is a worrying trend. The fire on board Maersk Honam, which tragically killed five crew members, is the most recent example of this issue and the loss is likely to generate the largest general average claim in history. As vessels continue to grow larger, the accumulation of cargo values, coupled with the increasing risk of onboard fires, needs to be addressed urgently by all stakeholders.”

Cyber threats also continued to concern cargo insurers, not only in terms of immediate damages but also because of potential disruption to the onwards supply chain. Supply chains would also be impacted by efficiency focused developments. These innovations had the potential to transform the global supply chain and could drive cargo underwriters to develop new products to manage this change. In addition, new inroads in big data and analytics held the potential to provide cargo underwriters with better tools and capabilities to manage their business, he said.