London:
The International Union of Marine Insurance (IUMI) has released its 2020 analysis of the global marine insurance market – known as IUMI Stats.The report presents a range of statistical data from a variety of sources, including IUMI’s own data, to provide an insight into the marine insurance market within the context of global trade and shipping.
Marine underwriting premiums for 2019 were estimated to be USD 28.7 billion which represents a 0.9% reduction from 2018.
The USD 28.7 billion global income was split between these geographic regions:Europe 46.3%, Asia/Pacific 31.8%, Latin America 10.3%, North America 5.3%,
Other 6.3%.
2019 saw Europe’s global share reduce slightly from 46.4% (2018) to 46.3% and Asia’s share increase modestly from 30.7% (2018) to 31.8%.
For global marine premium by line of business, cargo continued to represent the largest share with 57.5% in 2019, hull 24.1%, offshore energy 11.7% and marine
liability (excluding than IGP&I) 6.8%.
The offshore energy market saw a modest 1.4% reduction in total premiums in 2019 when compared with 2018. Premiums dropped sharply from 2014 to 2016 but more recent years have seen a flattening out. Premiums in this market are strongly influenced by the oil price. There is generally an 18-month time lag between a rise in the oil price and activity levels catching up.
Oil prices had begun to recover from 2016, although with some variation, which led to a reactivation of offshore facilities and a corresponding stabilizing of the global premium base. However, COVID-19 has reduced the demand for oil forcing prices downward again leading to more uncertainty in this sector.
Cargo
The global premium base for the cargo market for 2019 was reported to be USD 15.6 billion – a 1.5% reduction from 2018. Exchange rate fluctuations impact most heavily on this sector and so comparisons with earlier years cannot be exact. In general, cargo premiums are strongly correlated with world trade values but they have lagged behind in recent years.
IUMI’s 2019 numbers do not account for the impact of COVID-19 but the virus has injected significant uncertainty into future world trade forecasts in terms of values, volumes and changing trade patterns.This makes it difficult to predict the performance of the cargo market going forward.
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.
2019 started at around 60% which demonstrates a modest improvement compared with previous years and is expected to end slightly below 70% if the year follows 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.
Increasing risk continues 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 COVID19 due to port congestion and delivery delays. This is also increasing the likelihood of damage to vulnerable cargoes such a refrigerated goods.
Ocean Hull Global premiums relating to the ocean hull sector are relatively stable. IUMI reports a 2019 premium number of USD 6.9 billion representing just a 0.2% increase on the previous year.
Global premiums have stabilized but the global fleet continues to grow. Whilst this has slowed the increase of the gap, the gap still remains and is likely to continue to widen. In general, the age of the world fleet is increasing which is reducing the overall value of the asset base. This, in turn, has the potential to negatively affect premiums.
Vice-Chair of IUMI’s Facts & Figures Committee, Astrid Seltmann sums up: “Cargo and hull results started to recover somewhat in 2019 but from a very low – and for the hull market, unsustainably low – level. In the context of the COVID-19 disruptions in 2020, the challenge is to analyse how the current changes in the market environment will impact marine insurance market trends going forward