BY MATTHEW BRODSKY,
former senior editor/Web editor of Risk & Insurance®.
It must be one of those moments that makes veteran insurance professionals place their face into their palms and wonder why they're still in the business. We're talking that time in the depth of a soft cycle when everybody, including Kitchen Sink Insurance Corp., throws themselves into a line in a self-defeating attempt to grab market share.
The spectacle is all the more head-scratching in a specialty space such as marine, where technical skill and experience in underwriting are all the more important. Experts able to properly assess and price a risk in such niche fields are not easy to come by, so it's safe to assume that many of the new players that have jumped into the ocean-cargo space couldn't find such experts.
Then again, it's safe to assume that many of the carriers entering marine could care less about properly assessing and pricing risk. Underwriting profit down the road isn't as important to them as market share in the here and now.
So perhaps they're recruiting underwriters by waiting at the wharf for a docking vessel. If a ship's mate has a few weeks in port, why not hire him to write some fresh capacity?
A quick recap by the way: While rumors swirl about a property insurance market--heck, even the workers' comp market--that is seeing its first rate increases in years, the marine insurance market is still full steam ahead in soft territory. Rates fell in 2010 and are likely to continue to do so in 2011. Capacity is abundant.
As the most recent Marsh marine market research suggested, underwriters are "willing to compete aggressively for attractive new business."
The question is: Doesn't everything appear attractive when you've been out to sea for a couple of months?
The trick with marine in the economic downturn is that claims have decreased in part because of the economic downturn itself. Fewer ships are carrying less cargo and doing so at slower speeds because demand for their next trip isn't quick in coming.
When the world's economy belches smoke, sputters and then churns back to life, eventually, you won't need a compass to know which direction claims numbers will go. Straight north, in a hurry.
The question then won't be which underwriter will be left with a combined ratio on his marine business well above 100. It'll be how many of them are there, and how fast will they abandon ship.
September 1, 2011
Copyright 2011© LRP Publications