Too soon for optimism in the ocean hull insurance sector, reports IUMI

While it was encouraging to see the 2020 premium base in ocean hull growing from the previous year, alongside improvements in loss ratios, Rama Chandran, chairperson on the Ocean Hull Committee at IUMI (International Union of Marine Insurance) said that it was important not to forget that we were “operating from a very low position and that the premium base has only recently begun to creep upwards following a sustained decline since 2012”.

Speaking yesterday at the IUMI conference online from Seoul, South Korea, Chandram said that the improvement in loss ratios for 2020 largely stemmed from “reduced shipping activity during the recent COVID period and a subsequent lack of claims.”

He expressed concern over the long-term sustainability of the hull and machinery insurance sector.

Chandran said that H1 2021 had seen a potential deterioration in the overall premium base from 2020. Growth appeared to have slowed, or even plateaued, since 2020. He said that this was probably due to increased market capacity, particularly from London. “As shipping activity returns to pre-Covid levels, it is inevitable that we will see a rise in claims and that will dampen the more encouraging loss ratios IUMI reported for the 2020 period. Overall, the ocean hull sector is improving but it is not yet certain how sustainable that improvement will be.”

In his report on the Ocean Hull Committee’s work over the past year, Chandram said that it had identified three major concerns for the coming period:

  1. Covid continued to impact seafarers, with some vessels reporting up to 50% of crew affected. Challenges remained over seafarer vaccinations and the ability to switch crew at certain ports. “Through no fault of the seafarer, many vessels are sailing with crew on extended contracts, which has the potential for crew fatigue possibly leading to an increased casualty rate.” 
  2. Fires on large containerships continued to impact hull, cargo and P&I insurance. They have resulted in a tragic loss of life and environmental damage. “The main cause appears to be wrongly declared or non-declaration of dangerous cargoes. Much work is being done to address the issue and IUMI is at the forefront of lobbying for change. Said Chandram.
  3. Decarbonization of shipping was underway, but remained a long way from reality. Changes to fuel and propulsion types would impact the hull sector and underwriters needed to be in a position to understand the risks before they could develop adequate insurance products. Technology and infrastructure needed to be developed and crews needed to be trained appropriately. Like others in the industry, IUMI is calling for a holistic industry response, together with governmental support, to achieve a low carbon future.