The International Union of Marine Insurance (IUMI) presented its annual statistical report on the marine insurance market, reporting that global marine underwriting premiums for 2016 fell to USD 27.5 billion, a 9% reduction on the figure reported for 2015.
Vice-Chairman of IUMI’s Facts & Figures Committee, Astrid Seltmann explained:
“The 2016 number follows a continuing downward trend in marine underwriting premiums. In 2015 the adjusted figures of USD 30.5 billion was in itself a 9.9% reduction from 2014. We attribute part of the reduction to the strong US dollar when compared with other currencies, but also to general weak market conditions in terms of the global economy, general commodity prices and the poor state of the shipping and offshore sectors. This worrying downward trend leads to an increasing mismatch between income levels and the marine insurer’s obligation to cover major losses, particularly in light of the trend for larger vessels and greater accumulation of risks in port”.
- Cargo sector : Premium income in the cargo sector was reported as USD 15 billion for 2016 – a 6% reduction on the 2015 figure. Exchange rate fluctuations impact most strongly on cargo premiums and the recent strong dollar has “reduced” premium income from most other countries.
- Hull sector : The hull sector achieved a premium income of USD 7 billion which was a 10% reduction on the previous year. Although exchange rates may have been partly attributable for the decline, this has much less impact than in the cargo sector due to the global nature of the hull portfolio. Whilst the world fleet continues to grow, it also continues to age.
- Offshore energy : Premium income in the offshore energy sector dropped by 21% to USD 3.6 billion – this is on top of the 20% drop in the previous year. As the majority of business in this sector is transacted in US dollars, poor exchange rates cannot be blamed for the drop in performance. The continuing depressed oil price is the key reason for the downturn in activity and the postponement and cancellation of offshore projects.
Donald Harrell, Chairman of IUMI’s Facts & Figures Committee, concluded:
“Uncertainty exists throughout our market. Although the global economy appears to be improving, significant concerns or situations could lead to a stall and that will directly impact marine insurance. Global trade might be affected by Brexit as well as the current threat of a more competitive US trading policy created by punitive import taxes and lighter regulation on manufacturing. These changes to global trade flows and trade agreements will affect our sector as they evolve.
Continuing uncertainty is the only certainty for marine underwriters for the remainder of this year and beyond.”
