IUMI: Marine Cargo Insurance "Improving"
Sean Dalton, Chair of IUMI’s Cargo Committee reports the majority of marine cargo markets geographically can best be described as “hard” or “improving” amid significant change driven by unprecedented disruption to the global economy and world trade due to the COVID-19 pandemic.
Dalton made his comments at the IUMI (International Union of Marine Insurance) annual conference. “In the past 12 months there have been a number of large cargo losses. These include the tragic explosion in the Port of Beirut, a significant loss to a distribution facility impacted by the Nashville tornadoes, and the total loss of 4,200 vehicles aboard the Golden Ray. The Beirut Port explosion is troubling on many fronts and it is important to note that this is the second time in five years (Port of Tianjin explosion in 2015) that a port has been destroyed by an explosion involving hazardous materials. These underscore the important work that IUMI is doing to drive for improvements in the transport of dangerous goods and comes after the record number of cargo vessel fire losses in 2019.”
In its annual statistical update, IUMI reported global cargo insurance premiums to be $16.5 billion in 2019. Although a 1.5% reduction on the previous year, exchange rates, trade and other market conditions make direct comparisons with previous years challenging. However, there are indicators that loss ratios in 2019 are starting to improve.
The challenges facing cargo insurers include addressing the impact of the COVID-19 pandemic on their business as well as continued changes in exposures ranging from increased accumulations to unprecedented shipboard fires as well as new and evolving exposures such as cyber. At the same time, underwriters continue efforts to improve results and return to profitability.
To address emerging exposures 2020 has seen the introduction of new cargo coverage wordings including clauses for Cyber and also wordings for Communicable Disease. Market associations including the Joint Cargo Committee (JCC) in London and the American Institute of Marine Underwriters (AIMU) have promulgated unbinding proposals for wordings in the past year that are available for use.
While the challenges have been unprecedented, Dalton noted there will be opportunities ahead.
“Opportunities are also on the horizon as cargo returns to specialized underwriting. There will be an economic recovery and global trade will play a major role. Cargo insurance is a key enabler and insurers in this line will emerge healthier and in a position to provide the solutions their customers need. The changes taking place are not about “going backwards” but rather finding a sound way forward in the “new normal” and to contribute to making our business better and sustainable.”