A positive year for marine insurance with much change on the horizon
By Lars Lange, Secretary General, IUMI
Each year, the International Union of Marine Insurance (IUMI) collects information on the state of the marine insurance sector from its member associations around the world. This data is added to the many time-series charts that we’ve compiled for a number of years and analysed to provide a bellwether on the health of our three key business lines – ocean hull, cargo and offshore energy insurance.
Key data for 2022 was recently presented at our annual conference in Edinburgh and it was pleasing to report, for the first time in a few years, some real positivity in terms of market development across all the business sectors. On a global level, marine insurance premiums had grown by 8.3% on the previous year to reach USD35.8 billion. Premium was shared between hull (23.4%), offshore energy (11.5%) and cargo (57.3%) with the remaining 7.7% attributed to liability cover not provided by the large, mutual P&I Clubs.
Key drivers for the increase varied depending on the business line but included a strong post-covid economy and corresponding growth in global trade. Renewed activity both in terms of ocean transport and offshore ventures were also contributors as well as a more robust oil price and rising asset values.
Inflation impacted all business lines as it reached 10% and more in some regions. Interest rates and the cost of capital rose as a result. On the plus side, this was positive in terms of premiums received to cover more expensive assets but less positive was the growing cost of claims and repairs.
Our data split allows us to investigate regional trends and it was interesting to see Europe performing strongly again following a few years of decline. The Asia/Pacific market had slowed in 2022 probably due to a lacklustre economic performance in that region but also because of weak Japanese and Chinese currencies when compared with the US dollar.
Taken together, it was promising to see that loss ratios had also improved across all three core sectors. The loss ratio is the difference between income earned in premiums and money paid out in claims. Technical break-even is achieved when the loss ratio does not exceed 100% (ie claims costs don’t exceed premiums earned) however, the cost of doing business - overhead, capital costs, acquisition costs, management expenses etc - must also be taken into account.
The years preceding 2019 turned-in some disappointing loss ratios with technical breakeven rarely being achieved. However, performance
126 | ISSUE 106 | DEC 2023 | THE REPORT
has revived recently and the 2022 numbers were looking much more positive. This was probably due to the increased premium base achieved by those frame conditions mentioned above but also because of a much more benign claims environment. From 2019 to 2022, Covid reduced shipping and offshore activity which lowered the number of accidents and losses. During that period there were also fewer significant weather or other natural events such as hurricanes or earthquakes to drive up claims. Shipping and offshore activity has now normalised and climate change is injecting more unpredictability into our weather systems and so it is likely that we’ll see claims begin to creep upwards this year and next. That said, shipping per se is enjoying a long- term downward trend in claims and losses and major incidents now appear to be relatively stable at historically low levels.
Global shipping and trade continues to evolve and marine underwriters must maintain pace with the changes. Marine insurance is one of the key enablers of international trade and underwriters must adapt the cover they provided in order to ensure it remains relevant and fit-for purpose.
Perhaps the most significant issues facing marine insurance going
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