Reinsurance News

Demanding and persisting underwriting for marine insurance industry: WTW

27th June 2022 - Author: Kassandra Jimenez-Sanchez

Underwriting discipline persists for marine cargo insurance while underwriting for hull and liability remains demanding, according to the latest market update by WTW.

Marine shipping reinsuranceA hard market continues for cargo insurance; however, renewed competition and enhanced growth targets in the marketplace have moderated upward rate movement in 2022.

While rate increases are to be anticipated for incumbent renewals, reductions may be achievable in rare cases following a strategic marketing effort, the report noted.

Cargo insurers remain focused on bottom-line profitability, with continued scrutiny of insuring terms and conditions and capacity deployed, according to WTW. To achieve these, detailed exposure information and risk differentiation remain crucial.

The hard market cycle inched premiums closer to technical pricing requirements, while also pressuring deductibles upward and tightening coverage terms.

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These actions have had a positive impact on underwriting results, which lessens the need for drastic remediating action at subsequent renewals.

This rate remediation created an attractive entry point for new and revitalised cargo underwriting operations, according to the report.

Regarding marine hull and liability, the insurance market remains firm. Underwriters are still seeking increases on clean business, while mandating cyber and communicable disease exclusions, due to reinsurance restrictions.

Excess underwriters are seeking to reduce capacity, and quota share placements are the norm, though these trends are easing as most markets have stabilised, the report stated.

In the face of reduced carrier appetite, placing of excess coverage over $1m primary placements has become increasingly difficult.

In the past, marine bumbershoot underwriters have written policies with underlying non-marine liability exposures, such as auto and employers’ liability policies.

But now, according to the report, they are becoming reluctant to do so due to adverse loss experience and the underpricing of these exposures.

It also noted, they have increased their scrutiny of extending coverage over non-marine risk as well.

Along with the above, burdens are increasing on both sides of the hull and liability marine insurance negotiating table.

Underwriters are requiring substantially more data for renewals and new businesses. At the same time, a high number of buyers marketing their business is overwhelming underwriters, whose time to review is limited.

On top of these, they remain under scrutiny by their senior management, who have become much more involved in the process. This negatively impacts the renewal process from the buyer’s perspective, according to WTW.

Cargo marine insurance has also seen other challenges. The Covid-19 pandemic highlighted vulnerabilities through the supply chain; these include marine mishaps, cyber threats to marine trade and geopolitical instability, among others.

Finally, the report noted that cargo and stock throughput markets are challenged by catastrophic losses, resulting from mis-declared cargo.

Because cat management continues to be a concern for insurers, additional attention is being paid to cat definitions, especially regarding occurrence definitions and “fire following” buy-backs. In addition, insurers continue to seek the inclusion of straight-line wind in the windstorm definition.

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