SAFETY4SEA: What are currently the trends affecting the global marine insurance market and what will be the key challenges for the marine insurance operators within the next years?
Richard Turner: There are some very real challenges in the marine sector, particularly in the London market. I haven’t seen a shakedown in capacity of this magnitude in the past 25 years. We are seeing a significant number of insurers pulling out of hull or cargo insurance, or marine underwriting altogether. It has been estimated that 25% of the Lloyd’s cargo insurance capacity has left the market recently.
Understandably this is a very painful position, but it is also an inevitable outcome of too much capacity chasing too little business. Supply and demand is the key driver here and, quite simply, the over-supply that has been present in the market for some years has now forced premiums down to levels that are not sustainable. This means that even a modest upswing in claims will leave many portfolios very exposed.
We should note that there is not an issue of capacity in the market and clients will still be able to find cover – the problem we are facing is one of underwriting performance.
Capital providers are, understandably, seeking a profitable return but currently the market has not been able to deliver anything worthwhile. This has been the situation for the last five years and is becoming a real concern for our sector.
Alongside capacity and performance issues, there are two other long term challenges I want to highlight. The first is people and expertise. More automation means fewer people. Coupled with this, the stream of mergers and acquisitions has reduced the pool of expertise and fewer people are being dedicated to marine underwriting. Expertise and experience is being lost.
The second challenge – which might also be an opportunity - is technology. Technology will fundamentally change the way marine insurance is transacted, how money is moved around the system, how our products are put together and how business is placed in the market. We’ve already seen the emergence of PPL (Placing Platform Limited) which is enabling online placement in the London market. Inevitably this will lead to a reduction in people but it might also increase efficiency.
As an industry, we must embrace technology and welcome change if we are to prosper in the future.
S4S: What are the next frontiers for shipping risks? What should we expect to handle within the next five years?
R.T.: Technology is going to play a bigger role in the way cargo is moved around the world. Unmanned ships and autonomous vessels are already becoming more of a reality, albeit in a limited way. We must be ready to provide adequate risk mitigation in what will inevitably be a much more automated world.
The growth in protectionism is an increasing concern. Both China and America are significant influencers on global trade and restrictions on imports and exports are likely to affect the marine insurance premium base.
Brexit is an indirect form of protectionism. If the UK leaves the EU without an agreement on trade and services the UK’s economic activity and its international trade, including marine insurance, will become more difficult. And it is fair to assume that the amount of trade the UK will do, both in goods and in services, will suffer – at least in the short term.
S4S: How technology and digitalization may affect maritime losses?
R.T.: Technology and digitalization can be viewed as both a risk and an opportunity. A large proportion of the claims handled by the marine insurance sector occur because of human error. Technology can play a big part in reducing those errors. On the other hand, technology will produce new and currently unquantified risks, such as those arising from unmanned ships. There is an interesting conundrum here: technology might reduce the risk of a shipping incident by eliminating crew risk, but it might also introduce additional risks caused by computer malfunction or cyber-attack.
Technology will also play a key role in loss prevention and loss mitigation. For example, the ability to more easily track goods online and to control and monitor the temperature of those goods in transit. This new data will impact the insurance cover, type of product and level of protection that is purchased.
How have pressures from the market impacted the marine insurance market? What are your hopes and aspirations for the future? What are your top priorities on the IUMI agenda after taking the helm as President?
There are four key areas I would like to focus on during my term as IUMI President:
Membership – Our members are the heart and soul of our organisation and we will continue to deliver a comprehensive package of high-quality and relevant services for our membership. Simultaneously, we will expand our membership in the two key areas of Asia and Africa. The annual IUMI Asia Forum; our recent appointment of an Africa Ambassador (Hilton Adams); and the new membership category of “Associate Membership” offer a strong foundation for membership growth in these regions.
The way marine insurance is purchased and distributed across the world is constantly evolving. Our job as IUMI, is to speak confidently on behalf of our members and to represent an optimum insurance premium base worldwide which is why it is important to continue to develop our international membership.
Education – Over the past two years we have made solid inroads into delivering an education programme to encourage new talent into the sector while developing existing talent, and this is key to the future of our industry. Our aim is to increase the breadth of our education services whilst ensuring quality standards are maintained.
Lobbying - IUMI’s voice has become much stronger in the last few years and this will continue. Our Policy Forum works to identify, review and consolidate our position on issues that have the potential to impact our sector; we will also continue to represent the industry effectively at IMO. Our goal is to identify current and potential risks and take steps with the industry to ensure they remain insurable.
Data and digitalisation - This issue will become even more important and is one of our top priorities. In the longer-term, as mentioned above, we see fundamental changes to the way we conduct our business in terms of risk evaluation, claims handling and other underwriting processes. We will continue to build on the work already done and have created a Big Data and Digitalisation working group, working with software houses and experts across the industry to address the challenges and opportunities for marine insurance and our client base.
The views presented hereabove are only those of the author and not necessarily those of SAFETY4SEA and are for information sharing and discussion purposes only.
About Richard Turner, President of the International Union of Marine Insurance
Richard Turner, FCII, has worked in the insurance industry for 35 years. He has been in marine insurance for virtually all of that time, specifically for the RSA Insurance Group based in London. His career has seen him in the role of Hull underwriter from 1989 to 2001. He went on to run RSA’s London Market Marine operation from 2002 to 2009 before becoming Europe Marine leader. In 2010, Richard was promoted to become leader of RSA’s Global Marine business, with 30 operations throughout Europe, Asia and Latin America – a role which he carried out until just last year. Today, Richard is the Managing Director of RSA’s Global Speciality business in Europe. He has been elected President of the International Union of Marine Insurance (IUMI).