The global marine market is coming under increasing pressure due to a fall in maritime trade and the impact of the COVID-19 pandemic on their parent groups.
International Union of Marine Insurance (IUMI) President Richard Turner (pic) has said that the years of loss-making for the marine insurance sector was being put into sharper focus by the pandemic losses that major insurance and reinsurance groups were now faced with meeting.
Speaking in the first of a new series of podcasts by the organisation Mr Turner explained: “The Director General of the World Trade Organisation recently said ‘the COVID pandemic is shaking the world economy and world trade as a consequence’.”
As such the level of world trade is reducing and with it the demand for insurance to cover the vessels and cargo moving across the planet.
“Take the car industry for instance,” he added. “There are fewer cars being sold and therefore demand drops. With a drop in demand there are fewer cars manufactured so there are fewer vehicles being shipped and that reduces the demand for cover and with it premiums.”
He warned that the accumulation of goods at ports was growing with some vessels taking weeks to access ports and their cargos. The fall in global oil prices had also seen a reduction in spending in new energy projects or the exploration of new fields, again reducing the demand for insurance coverage from the organisation’s energy underwriting members.
He warned: “The global supply chains are increasingly interconnected, and COVID has impacted that chain.
“In the longer term will the current situation see a shift away from globalisation. Will we see a move towards more localised supply chains? This may also be affected by the ongoing geo-political tensions around the world at present.”
While IUMI members do not underwrite protection & indemnity covers the level of physical claims have reduced in line with the drop in trade levels. However, Mr Turner said that did not mean that marine insurers had not been impacted.
“In many cases marine underwriting divisions are part of a larger insurance or reinsurance group that have suffered significant claims,” he explained. “The level of loss is at a point where is impacts all areas of the industry. Marine insurance has been unprofitable for some time. The price increases seen in recent months are a recognition of the pressure the insurers and reinsurers are under”
He added that while the industry had quickly and successfully adapted to the need to work remotely the impact would be felt once the pandemic was over.