A report from Willis Group Holdings indicates that “while the Marine insurance market remains relatively weak overall, there are some signs of hardening, with firmer rates being seen in a few very specific sectors, namely the Protection & Indemnity (P&I) and Scandinavian Hull markets.”
The review found that, while the Marine market remains predominantly soft, there were double-digit average rate increases seen at the last P&I renewal in February this year. Willis predicts that rates may rise by another 10 percent at the next round of renewals in February.
Willis’ report notes that “while rate reductions in the Hull market have slowed, the Norwegian Hull Club, the world’s largest single hull and machinery leader, is leading the charge for increased premium by attempting to impose increases of between 10 percent and 15 percent.
“To push these increases through, the Club are prepared to lose around 30 percent of their book, albeit not their core favored domestic clients. While other insurers have attempted to be supportive of this move, they have wilted in the face of the intense competition that remains in the hull sector,” the report said.
Richard Close-Smith, Executive Director and co-ordinator of the Willis Marine Market Review, observed: “It seems that within the Marine Cargo and Liability markets, there are still opportunities for both improved terms and broader product offerings. Conversely, the price of P&I insurance is expected to rise yet again, while the Hull market is giving mixed signals and lies somewhere between these two extremes.”
The Willis review, “Sailing Close to the Wind,” found that while the shipping boom continues unabated, insurers remain concerned that the skyrocketing cost of steel may be causing ship yards in some countries to cut back on the quality of steel used in shipbuilding. This, coupled with the growth of new, but relatively inexperienced, ship builders and diminishing crew resources, will likely give rise to the potential for greater losses.
Other key findings include:
— Concerns about the quality of underwriting security have been raised, with some pure Marine underwriters being downgraded, while new start-ups find it increasingly difficult to raise capacity.
— There is a general shift in capacity eastwards from London towards Asia, with Singapore having a prominent role.
— There is sufficient global capacity for virtually all major marine risks no matter how large or complex.
Alistair Rivers, Willis Global Marine Chief Executive, commented: “We live in exciting times, as our clients’ businesses are going through a period of unprecedented growth, with commodity prices at an all-time high. At the same time, we are seeing consolidation within the client base, whilst insurers seek to establish global presences closer to their clients. This presents us with challenges and opportunities, but as Willis Marine is a truly global business, we are extremely well placed to handle these developments and look forward to continuing to grow our business further while serving our existing customers wherever they may need us.”
Source: Willis Group Holdings – www.willis.com