Could you describe the maritime insurance market during the pandemic and what you expect to change in 2022?
In extraordinary operating conditions, the marine insurance industry has largely proved resilient and adaptable to the coronavirus outbreak. It is beyond doubt that Covid-19 has forced insurers to consider the impact of increased claims on their business, as they were suddenly responsible for
much higher risk than anticipated when writing a new policy. As a result, renewal terms across the market incorporated exclusions in the policy terms in order to clarify and limit the breadth of coverage afforded on events, such as the Covid-19 pandemic or similar.
The ongoing disruption in the global financial markets is putting more burden on underwriters, however this hasn’t shown a catastrophic impact on insurance companies. The natural catastrophe losses already booked are estimated to $85 billion and with the winter season ahead, it won’t be surprising to see a further hardening of the reinsurance rates in January 2022.
On the other hand, the hull insurance has been largely unaffected by the pandemic. The improved underwriting environment (total premium written has increased) has new capacity enter the market (15 new syndicates were attracted) keeping the rates of marine classes -including Hull and Machinery (H&M), at reasonable levels for accounts with clean or favourable claims record.
At the same time, momentum is building in linking the monitoring and reporting of Environmental, Social and Governance (ESG) performance to insurance. An interesting and recent development in the Lloyd’s market, is the establishment of a Syndicate that focuses exclusively on offering additional capacity to businesses that perform well against ESG metrics. This means that businesses with high ESG ratings will be considered a lower risk profile and no doubt this is a trend expected to develop further going forward.
The picture, though, is different in the P&I market. According to market reports, 2020/21 was a difficult year in terms of technical underwriting results, with all Clubs reporting net combined ratios in excess of 100%. The blame is attributed universally on Pool and Covid-19 claims. We are only halfway through the P&I year, so there is plenty of time for further incidents, particularly in the North Atlantic Winter, which is generally viewed as the worst time for major P&I claims. Also, another factor to take into account is that the IG reinsurance program 2-year ends its 2-year cycle in the middle of a harden- ing market and a deteriorating loss ratio.
Already, one IG Club has announced supplementary calls and two significant increases to restore their finances after the past years’ heavy losses and it won’t be a surprise to see more Clubs follow- ing. We are anticipating all clubs to announce their 2022 intentions soon that are likely to be in the same ballpark. At least, the freight market it booming!
* Founding Partner Searock Marine Insurance Brokers
The answer was provided for NAFS magazine issue 143 in its special report “WOMEN in SHEPPING”