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By DAN REYNOLDS, senior editor of Risk & Insurance®

A risk management consultant we know once referred to the appetites of certain Lloyd's syndicates with the statement, "They'll bet on anything."

In its Marine Market Review issued on Nov. 18, insurance broker Willis Group Holdings notes that as many as 11 new carriers will have entered the global marine market by the end of this year, a development Willis characterizes as "illogical."

As many as one-third of carriers in 2010 lost money on their marine underwriting, according to Willis, and prices continue to fall. And a feared double-dip recession could erode the one good news story from 2010: that there was something to talk about in terms of investment returns.

So is that increased capacity in the marine segment good news for the buyer? On the one hand, yes. Nothing wrong with boatloads of choices and low prices. But it may not be such good news when you understand that, because of the position they are putting themselves in, carriers that are underwater may have their underwriters lateral claims to their attorneys in the effort to save every penny they can. Willis believes that some firms may use lawyers to correct their rash underwriting decisions.

Think that's going to make resolving your claim any easier? Answer is no.

Willis, as it would, argues that now is the time that you need a good marine broker. Guess what? You always need a good broker.

In order to navigate this marine market, the carrier you choose may be more important, unless you want your program to end up in the deep, the "full fathom five," that we reference from William Shakespeare's The Tempest.

The undercurrent from existing carriers in marine is that they agree with Willis, and they believe that the new entries are being a tad foolish.

In an e-mailed response to questions from Risk & Insurance®, a spokeswoman from Arendal, Norway-based Gard Marine & Energy said that capacity is only "part of the equation." Knowing that an insurer will remain afloat long enough to pay claims can make a "critical difference to a shipowner's operating performance," she said.

Zach McAbee, a Chicago-based vice president for marine coverage for Liberty International Underwriters, the Liberty Mutual subsidiary, also thinks new entrants to marine might not be able to stay afloat.

"We do believe as the Willis report refers to that the broader market is largely unprofitable and market instability is an inevitable byproduct of this," McAbee said.

Additional concerns in marine concern the lifting of liability caps for offshore drilling rigs, the fact that shipping to and from China involves doing business with a country whose port infrastructure isn't the most advanced in the world, and the fact that piracy claims--some $300 million since 2008--aren't going away any time soon.

The W.R. Berkley Corp.--which is one market that Willis singles out as having a healthy appetite for new marine business--did not return a phone call requesting comment.

December 6, 2010

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