IUMI concerned by erosion of global premium base and attritional losses

The International Union of Marine Insurance (IUMI) has warned that while, in general, major losses remain stable, “the continued erosion of the global premium base means that attritional losses are becoming much more significant”. It added that the increased risk of large, more complex and costly claims has the potential to impact all marine underwriting sectors in 2019. According to IUMI, although the global fleet continued to grow at about 3% in 2018, the number of total losses (vessels over 500GT) stood at a 20-year low. Only 21 total losses were recorded last year and this continues a general downward trend since 2010 across all vessel classes. It said that serious casualties (excluding total losses) have stabilised during the past three years but are still higher, on average, than in 2014. There is likely to be a spike in Q1 2019 when numbers have been finalised. Rama Chandran, chairman of IUMI’s ocean hull committee, said: “We are pleased to see a stabilisation in total losses and serious casualties and this is a clear indication of an enhanced safety culture, improved vessel design and more effective regulation across the industry. Statistics show total losses of younger tonnage (less than 15 years) are dramatically lower in 2014-2018 than in 2009-2013. Underwriters welcome the industry’s overall improvement in safety but also recognise that increasing size, scale and complexity of new tonnage is affecting the current risk profile.” He went on: “There is the potential for severe volatility in a conventional hull portfolio, influenced by the continuing erosion of the premium base. Reduced asset values and reduced activity (in some sectors) have driven down premiums. As a result, the increased impact of attritional losses has become significant. This, coupled with occasional spike losses, is seriously affecting international underwriting results.” He added: “Going forward, our main concerns continue to be the accumulation of risks associated with large container vessels and, in particular, the risk of onboard fires. We are also focused on advances in digital technology – both in naval architecture and in vessel operations – and the ability of seafarers to effectively manage cutting-edge technology and growing amounts of data. We are also likely to see increased machinery claims resulting from the 2020 sulphur limit.” As for cargo insurance, Sean Dalton, chair of IUMI’s cargo committee, noted that global cargo marine insurance has been unprofitable for a number of years, whereas historically it was one of the most profitable lines of marine insurance. He said premiums are not technically adequate to cover losses and expenses. “Going forward, we see the main challenges will include larger and more complex risks, nat cats, and unknown vessel and port accumulations," he said. "We are also seeing an increasing gap in underwriters’ technical competencies. For many years, accounts have been largely underwritten and priced on loss experience with less attention paid to exposures, which have now grown in size and complexity. Coverage has also broadened significantly. Market conditions, however, are slowly improving and underwriters are now addressing the issues of technical premium inadequacy, exposures and terms.”

IUMI concerned by erosion of global premium base and attritional losses

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