Page 42 - WTW Asia Insurance Market Report
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Marine

Marine market pricing has been in steady decline over the last five years,
fuelled by overcapacity resulting from the influx of external capital seeking
greater returns than that available elsewhere. Marine and Aviation are
the only insurance classes offering non-static risks where modest losses
as the price of gaining access to the higher potential rewards appear
“acceptable”.

In previous “depressed” insurance cycles, there were still a       The major causes of total losses in the industry remains as
few sectors of the shipping industry that remained buoyant.        Heavy Weather followed by Fire and Groundings, usually
2016 was perhaps the first time when nearly every type of          as a result of poor ship-management procedures and poor
ship across the world saw declining rates - as depressed           navigation. Indonesia suffered two high profile losses with
as some of the underwriters who wrote their risks. Reports         the “Wihan Sejahtera” and the “Thorco Cloud” at the end of
are that the overall underwriting results are good, largely        2015, which could have an effect on underwriting appetite.
because of a benign claims environment which literally             The good news is that 2016 has bucked the trend so far
keeps them from sinking. As a result, there is some ill-           and has seen a reduction in major casualties.
disciplined marine underwriting chasing income, with little
understanding of the risk involved and a poor approach to          “In this buyers’ market, P&I and Hull
claims when they occur.				                                        Premiums are falling despite major
                                                                   losses demanding higher claims costs”
Marine premiums reduced by 10.5% between the years
2014 to 2015. This put the USD per Deadweight Tonnage              Hull and Machinery (H&M) is offered by a growing list of
(DWT) at the lowest point since the last soft market in            insurance companies and is subject to fierce competition,
the early 1990s. The market still belongs to the buyers,           reflecting overcapacity. Hull market rates have been
with individual accounts varying predominantly according           reducing for almost a decade and no sudden changes are
to claims record rather than quality of the underlying             foreseen for the next 24 months at the least.
risk. Variance between markets continues with more
placements than ever on verticalised rating basis even             Hull and Freight Interest rates were at an all-time low due
within the same regional market, ranging upto 25%.                 to fierce competition amongst underwriters. Being total
                                                                   loss insurance only, Hull & Freight insurance is more of a
         Average Rate and USD per DWT per vessel                   commodity product as there is no need for added value
                                                                   in service. As long as this is placed with well reputed
1.000%                                                       6.00  underwriters, HI/FI is recommended to be used as a tool to
0.900%                                                       5.00  achieve the best possible result.
0.800%                                                       4.00
0.700%   Rate              USD per DWT                       3.00
0.600%                                                       2.00
0.500%   2009 2010 2011 2012 2013 2014 2015                  1.00
0.400%                                                       -
0.300%                                            2016
0.200%
 0.100%
0.000%

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