By CYRIL TUOHY, managing editor of Risk & Insurance®.
The past few years have seen wrenching changes to the marine market. Aye! Aye! Bring 'em on, I say. There's nothing an oceangoing vessel loves more than to have its hull swept clean of old, encrusted barnacles.
From within, new technical pricing and exposure analysis, along with a greater reliance on actuaries and quantitative models, have injected fresh blood into a hidebound industry.
Old industry "captains," guided by beacons of centuries-old reliance on traditional apprenticeships and experience rating practices, are being challenged by a new generation of underwriters and computer software.
Good riddance to the days, I say, when marine underwriters worked only through pooling structures or operated quasi-independently within larger, multiline carriers. Marine policyholders can only benefit as underwriters adapt and work more closely with their crewmates in larger property/casualty carriers with deeper resources and global talent.
We all know how Lloyd's got started in 1688 in a London coffeehouse owned by Ed Lloyd, who catered to seamen, sailors and merchants. Lloyd eventually figured out he could sell hull and liability coverage to them, along with their Scotch. That's exactly my point. We're not in 1688. We're 323 years on.
External factors have swept through the industry as well. Falling demand since the bust of 2008 has meant fewer ships carrying less cargo at slower speeds with fewer crews. The upshot is lower exposure values, fewer and small-sized claims ? and another year of soft rates in 2011. So what else is new?
Rates in the marine market have been falling for years. Declines accelerated in the face of a raft of new underwriters, plying the insurance waters during the mid-2000s shipping boom.
At some point, the recovery will pick up steam and the Great Recession will recede further in our wake. All those cars, clothes and toys will need to be insured as they make their way across the oceans to consumers around the world.
Maersk Line, the global container shipping company, just announced a $1.9 billion order with Daewoo for 10 Triple-E-class container ships. When the first of the container ships is delivered in 2013, they will be the largest in the world and help Maersk meet projected growth of 5 percent to 8 percent in the Asia-to-Europe trade over the next four years. It's a good sign that exposure volumes will bounce back with future growth, and premium growth is likely to follow.
September 1, 2011
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