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U.S. ocean marine insurers reportedly continued to outperform the property/casualty business as a whole in 2002, but the market should not begin celebrating just yet, according to David French, chairman, American Institute of Marine Underwriters (AIMU).
Addressing a meeting of the Marine Insurance Association of Seattle, French noted, “Fortunately, marine insurance has performed better than the P/C business in recent years. We turned the corner faster than the P/C business as a whole. And, of course, we did not share in the catastrophic losses of 9/11.”
While the industry-wide combined ratio for 2002 was 107.2 percent, AIMU reports U.S. marine underwriting members posted a far more respectable 92.2 percent – a further improvement from the nearly 99 percent combined ratio recorded in 2001, and the market’s lowest combined ratio in six years, he observed.
In other words, French noted, AIMU members attained the target ROE of 12 percent that the property/casualty industry as a whole is struggling to reach. Still, he cautioned that there were several signs that needed watching closely in the market.
In terms of premium growth, the pace of hardening in the marine market looked to be slowing. Net written premiums for marine insurers in 2002 rose just 5.7 percent to nearly $1.3 billion, while net written premiums for all property/casualty lines grew 14 percent in 2002.
“The sluggish economy in the U.S. and worldwide is likely a contributing factor to the modest increase in premiums experienced by marine underwriters last year,” French said. “U.S. GDP rose only 2.0 percent last year and is expected to rise only 2.4 percent this year. But the larger question remains: does this decline in premium growth indicate a turn in the marine market? I think not. Anecdotal information suggests that pricing discipline has not been abandoned.”
French pointed out that to a great extent, the ocean marine industry’s performance will follow the results of its two largest lines – cargo and yacht. In 2002, cargo recorded a remarkable combined ratio of 75.4 percent, nine points lower than in 2001. By contrast, the combined ratio of the yacht line deteriorated to 97.5 percent in 2002, from 93.3 percent in 2001.
Meanwhile, the most dramatic decline in results was in ocean hull, which recorded a combined ratio of 132 percent in 2002 – its worst combined ratio since 1998.
At the same time, the most significant improvement came in offshore risks, which saw a combined ratio of 93.3 percent in 2002, down nearly 60 points from the 153 combined ratio in 2001.
French noted that AIMU strongly supports efforts to strengthen security at U.S. and foreign ports. Right now, only four percent of the 14 million intermodal containers which enter the United State each year receive security checks, he said.
“As a result not only of 9/11, but the state of the U.S. economy and the ongoing hard market, it’s hard to recall a time more turbulent than the one the overall property/casualty industry and marine insurers face today,” French noted.
But the challenges that confront marine insurers extend beyond those of a highly competitive global marketplace, the threat of terrorism and an uncertain world economy, according to French.