International Union of Marine Insurance (IUMI) Secretary General Lars Lange has warned the recovery in the global marine insurance market remains fragile with fears that low claims levels are masking the continued struggles for the sector.
IUMI released its Stats Report 2021 an analysis of the global marine insurance market for the past year.
It reported global marine insurance premiums for 2020 increased by 6.1% from 2019 to reach $30 billion. “This demonstrated real market development in all marine insurance lines (except P&I) for 2020, however early indications in 2021 are showing that continued development is uncertain,” it added.
The hull underwriting sector grew by 6% in 2020 with global premiums reached $7.1 billion. Importantly, the gap between global premiums and global tonnage had begun to reduce. For the first time in many years loss ratios had improved to return the sector to a technical break-even position. However, it added any recovery had begun from a very low base and a return to more normal levels of shipping activity is likely to increase current low levels of claims frequency.
As with the hull sector, cargo underwriting also returned to a technical break-even position in 2020 having achieved a 5.9% increase in global premiums to reach $17.2 billion. However, a likely increase in nat cat events going forward coupled with increased risk accumulations has the potential to impact cargo underwriting performance in 2021.
Lange added: “The health of marine insurance as detailed in this year’s IUMI Stats Report is mixed. The 2020 global premium results and loss ratios from the hull and cargo underwriting sectors showed that both these insurance lines returned to a technical break-even in that year. This was achieved after many years of unprofitability. However, the recovery was from a very low base and within the context of reduced shipping activity and, consequently, a very low claims frequency. As we move forward, we are seeing shipping activity return to pre-covid levels and offshore projects being commissioned and reactivated. There is concern that a revitalized shipping & offshore industry will generate additional claims which may, in turn, impact on future profitability.”
The report added the increase in the oil price had reversed the fortunes of the offshore energy insurance sector in 2020 to halt the many years of a declining premium base. The 2020 premium base saw an increase to $3.6 billion. IUMI said new underwriting potential is likely to result from increased offshore reactivation but this will bring additional risk and the possibility of an increase in the current extremely low levels of claims.