MARINE UNDERWRITERS WARNED ABOUT CHALLENGES AHEAD
Source: insurancenews.com.au, 26 November 2012
According to American Institute of Marine Underwriters (AIMU) Chairman Robert Gallagher, marine insurers will be hit by low interest rates and a weak global economy. He said that marine insurers will be operating in a lowinterest-rate environment for the foreseeable future.
Under this circumstance, it means that insurers must place a greater reliance on underwriting success to produce profits. Companies must adopt an underwriting-first principle rather than writing for market share. Marine insurers must also improve their combined ratios to maintain returns to shareholders, even in a highly competitive market.
Gallagher said global economic performance affects marine insurers too. A flattening of world trade produces little exposure growth. The Panama Canal expansion project, which will allow more and larger ships to pass through, also poses a challenge.
He added that although the risk of casualty on large container vessels may be lower, the severity of accidents will tend to be higher. He is concerned about the US drought as any reduction in agricultural production would result in less cargo to insure. As more offshore wind farms are built, transporting turbines poses a challenge to marine underwriters.
AIMU reported a combined gross ratio for all marine lines of 90.3% last year – worse than the 82.3% recorded in 2010 but better than the catastrophe-hit 2011 property/casualty result of 106%.