--By CYRIL TUOHY
A wave of changes is coming to the marine underwriting sector that will require some adjusting for old-time underwriters, but new opportunities as well for young, up-and-coming talent, experts said.
The changes are cyclical and noncyclical and are taking place against a backdrop of a shrinking market, due in part to the Great Recession when cargo volumes sank and shipowners tied up their ships.
"The ocean marine insurance industry has become more concentrated," wrote Jerry Theodorou, vice president of insurance research and publications with Conning, the Hartford, Conn.-based consultancy, in a 2009 report titled "Entering New Waters."
He estimates there were 106 groups writing ocean marine insurance in 2009, down from 189 in 1986, part of the reaction to a shrinking cycle. Expense ratios last year were 35.2 percent, up from 31.4 in 2009, Theodorou said.
Fierce competition and a logic-defying surplus of capacity already saturating the marketplace is making it even more difficult for underwriters to turn a profit, according to a marine industry report prepared by Willis, the global brokerage.
Theodorou, in a July interview with Risk & Insurance®, said while there are fewer options in the United States for would-be buyers, there's still plenty of choice. Therefore, particularly with more carriers entering the market, U.S. buyers looking for choice are going to have to set sail for the growing London market, or Singapore or Oslo, Norway.
The U.S. ocean marine market represented about 18 percent of the global total in 2009, Theodorou said.
Theodorou also said there's been a long-term shift in the organizational structure of marine underwriting units. For decades, the marine market was characterized by individual underwriters having gained special expertise through apprenticeships and fostered through deep, long-term relationships.
Now, marine managers are more likely to report to "generalist insurance executives," and are being required to operate in ways similar to underwriters in other parts of the property/casualty industry, he said.
"Old-line marine underwriters didn't have the latest tools for managing risk, but the marine people today that are within larger organizations have the benefits of catastrophe modeling to track accumulation," he said.
Modeling and analytics can cut both ways, said Raymond T. Martino, president of Travelers' Ocean Marine business unit.
"Insurance companies have lost some of the hands-on touch about the exposures with the use of software and analytics,"
he said. "It's a good thing for the sake of efficiency, but it puts the onus on the risk manager and the logistics department to keep track of the exposures."
A long-term challenge is already beginning to appear in the form of less experienced underwriters joining industry ranks. Carriers are having to train new underwriters more quickly and more often than in the past.
There's not an underwriter who doesn't have a story of seafarers getting lost on the high seas, and merchant seamen have become so reliant on global positioning systems that it's a real question as to whether today's crews even know how to sail by instruments and stars alone, according to one expert.
September 1, 2011
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