Speaking at IUMI (International Union of Marine Insurance) annual conference, Sean Dalton, Chair of IUMI’s Cargo Committee reported the majority of marine cargo markets geographically can best be described as “hard” or “improving” amid significant change.
In its annual statistical update, IUMI reported global cargo insurance premiums to be US$16.5 billion in 2019. Although a 1.5% reduction on the previous year, exchange rates, trade and other market conditions make direct comparisons with previous years challenging. However, there are indicators that loss ratios in 2019 are starting to improve.
The challenges facing cargo insurers include addressing the impact of the COVID-19 pandemic on their business as well as continued changes in exposures ranging from increased accumulations to unprecedented shipboard fires as well as new and evolving exposures such as cyber. At the same time, underwriters continue efforts to improve results and return to profitability.
The COVID-19 pandemic has caused unprecedented disruption to the global economy and world trade affecting manufacturing, supply chain and demand. This has a direct impact on exposures insured including volume, accumulations in port and aboard vessels.
However, to date there has been minimal loss activity as cargo insurance policies provide coverage for physical loss or damage and most policies do not provide coverage for delay, loss of market, or inherent vice. Cargo insurance professionals including underwriters, brokers, claims and risk engineering have responded extremely well to the challenges of COVID-19 while working through significant market corrections that pre-dated the pandemic.
Changes in the cargo insurance market include a return to exposure underwriting. This has resulted in underwriters improving technical rate adequacy and better matching coverage offerings with exposures. Insurers are more judicious in deploying their capacity as they seek to better balance their portfolios. The quality and relevance of information is markedly improved. While insureds experience the result in the form of increased premiums and reduced coverage, in many cases these have been lessened due to decreased exposures.
To address emerging exposures 2020 has seen the introduction of new cargo coverage wordings including clauses for Cyber and also wordings for Communicable Disease. Market associations including the Joint Cargo Committee (JCC) in London and the American Institute of Marine Underwriters (AIMU) have promulgated unbinding proposals for wordings in the past year that are available for use.
The International Union of Marine Insurance (IUMI) represents 45 national and marine market insurance and reinsurance associations. Operating at the forefront of marine risk, it gives a unified voice to the global marine insurance market through effective representation and lobbying activities. As a forum for the exchange of ideas and best practice, IUMI works to raise standards across the industry and provides opportunities for education and the collection and publication of industry statistics. IUMI is headquartered in Hamburg and traces its roots back to 1874.