The marine market has showed signs of firming since last year’s hurricane losses, but we are a long way yet from a hard market.
Conditions in marine insurance markets are mixed. Loss-affected lines, such as yacht insurance and the more distressed parts of the cargo market, are experiencing significant price increases.
However, the bulk of the hull and cargo markets continue to bump along the bottom. Loss-affected accounts are now likely to be subject to price increases but insurers will also fight hard to retain or win quality risks.
Major casualties are thankfully few, although the Maersk Honam container ship fire on 6 March 2018 has unsettled insurers.
The vessel, under a year old and carrying 7,600 containers at the time of the fire, highlights growing concerns for the fire-fighting capabilities of ultra-large container ships.
The incident, which resulted in a substantial cargo loss and salvage operation, is expected to cost insurers in excess of $500 million, with the general average claim estimated at $200 million.
Many buyers are understandably nervous that the insurance market might overreact at some stage.
While some marine underwriters are showing more resolve, fears for a possible market hardening look misplaced.
A buyers’ market
Broadly the marine insurance sector is a buyers’ market, characterised by excess of capacity. While the market is not hard, it is firm.
Underwriters are differentiating between distressed and good risks. Quality risks are still able to achieve better terms, and we have seen attractive accounts move for more favourable terms.
However, market conditions may change following the recent mandate from Lloyd’s (Jon Hancock, Performance Management Director) focusing on the poor performance in a number of classes: cargo, hull and yachts being among the worst-performing classes at Lloyd's over the past three years.
In recent weeks a number of syndicates have withdrawn from these classes (notably Cargo) and the expectation is we will see similar action being taken by others over the next few months.