Willis Marine Market Review: Surplus Capacity Defies Logic
London, UK, November 29, 2010 – While the shipping industry is showing tentative signs of recovery, the
surplus capacity in the marine insurance market defies logic as more insurers queue up to enter
an already crowded line of business where rates are continuing to fall. This is according to
the annual Marine Market Review from global insurance broker Willis Group Holdings (NYSE:WSH).
The Willis Marine Market Review, which can be read here, comments that 2010 has seen
an improvement in the state of the market, with a reduction in the number of laid
up vessels, the majority of freight rates slowly increasing and ship values ceasing to plummet. Despite
this gradual upswing in shipowners’ fortunes, the report found that the marine insurance market is still
feeling the pinch due to fierce competition, and questions why new insurers continue to enter the
fray when there is little profit to be made.
With its relatively low exposure to natural catastrophes, the marine market is often seen as a safe
bet for large composite insurers seeking to diversify their portfolios. The review found that up to
11 new insurers will have entered the Hull & Machinery market by the end of this
year, despite its lack of profitability, and suggests that this could be because the marine business
is such a small part of big insurers’ overall revenue that they don’t feel the pain.
The report noted that while there is still some profit to be made in ancillary insurances like
war risks, it seems illogical that new capacity continues to be added to an already saturated
marketplace for the main lines of business.
Commenting on the overall findings of the report, Alistair Rivers, CEO, Willis Global Marine, said, “From a
client perspective, the outlook is good: pricing is competitive, capacity for all but the largest risks
is freely available and choice is greater than ever before. In the insurance market where profit
margins continue to be squeezed, we foresee increased divergence between those underwriters who are looking to
build or expand their accounts and those who may become increasingly defensive or selective.”
Other key findings in the report include:
- Piracy continues to be a huge concern for shipowners and is spreading from the Gulf of Aden
into the Indian Ocean. Claims arising from piracy haveexceeded $300 million and the report says that
it is hard to see any solution in the short term.
- The Protection & Indemnity (P&I)
industry reported very positive results for the 2009/10 financial year. Across the market as a whole,
underwriters almost broke even, with an overall underwriting deficit of only 1 percent. Over the same
reporting period investment revenue approached $680 million -a huge bounce back from 2008/09 when investment losses
cost the market $840 million. Against this positive market picture there remains a material variance in
results between individual Clubs. On a financial year basis the largest individual club underwriting surplus was
7 percent and the worst deficit was reported at 23 percent.
- Cargo shipments are starting to
increase. There is some optimism in the market but the recovery looks to be tentative.
increase in sanctions against countries such as Iran has brought new challenges to shipowners in 2010,
said Willis. Underwriters and brokers are constantly working to ensure they remain compliant within the various
different sanction regimes.
Willis Group Holdings plc is a leading global insurance broker. Through its subsidiaries, Willis develops and delivers
professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public
entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries,
with a global team of approximately 17,000 employees serving clients in virtually every part of the
world. Additional information on Willis may be found at www.willis.com.
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