The International Union of Marine Insurance (IUMI) presented its analysis of the latest marine insurance market trends at its 150th annual conference in Berlin, Germany.
The global marine insurance premium base for 2023 was reported as USD 38.9 billion representing an uplift of 5.9% from the previous year. Development was seen across all lines of business with the Offshore Energy sector enjoying a 4.6% increase, Cargo insurance 6.2% increase and Ocean Hull 7.6% increase.
Providing some context, Astrid Seltmann, Vice-Chair of IUMI’s Facts & Figures Committee, said: “Global premiums reflect a combination of insurable volumes and prices per unit. The drivers for the increase in premiums are typically a continued rise in global trade volumes & values (cargo), coupled with increases in vessel values (hull), or the increase in oil price inducing more activity in the offshore energy segment. More widely, geopolitical conditions will have impacted premiums in a number of regions, as have general market conditions, specifically capacity. Overall, 2023 appears to have been a positive year for marine underwriters. The other part of the equation is the impact of claims which has been comparably benign over the past few years, despite individual severe claims giving rise to concern such as fires; and some visible inflation impact on the average cost of attritional losses. However, ever larger vessels, increasing value accumulations, changes in technology and fuels as well as changes to trading routes all mean a change of risk, which needs to be taken monitored and taken into account going forward.”
Offshore Energy
Global premiums in the Offshore Energy market were reported as USD 4.6 billion in 2023, a 4.6% uplift on 2022. The UK continued to dominate with the Lloyd’s and IUA markets accounting for a 28.2% and 36.8% share respectively.
The fortunes of this market tend to follow the oil price which appeared to have stabilised at a comparatively healthy level. This had driven renewed activity which, in turn, had led to positive market development. Premiums had rallied after reaching a low in 2019 and have continued upwards since then. The future trend will depend on the stability of the oil price and OPEC+ production decisions as well as insurance market capacity.
In recent years, claims were relatively low even though many offshore assets were being reactivated. However, 2023 saw two major losses and loss ratios (Europe) were starting out at a higher level than in previous years. Loss ratios in this sector take time to develop with no obvious pattern and so it is not certain how 2023 will play out. However, it is likely that 2023 will underperform when compared with the years 2020-2022.
Although day rates for offshore assets remained high, future performance of this sector will depend on oil price/production, weather events and market capacity. Similar to last year, a fragile balance between premiums and claims remains.
Cargo
Cargo insurance returned a global premium base for 2023 of USD 22.1 billion – a 6.2% improvement on 2022. All regions experienced growth with Europe and Asia enjoying marked positive development. Overall, Europe claimed a 39.8% share followed by Asia/Pacific (32.2%), Latin America (11.9%), North America (7.5%), Middle East (6.0%) and Africa (2.7%). In general, premium growth in this sector follows global trade which had now normalised following COVID. The International Monetary Fund was predicting continued growth in world trade values, and this bodes well for cargo underwriters going forward, although such projections are subject to a considerable amount of uncertainty given the geopolitical situation. It should be noted that exchange rate fluctuations tend to impact most heavily on this sector, such that growth trends may deviate in local currencies and also make direct comparisons with earlier years more difficult.
Cargo underwriters suffered challenging loss ratios prior to 2019 but since then ratios have improved year-on-year. Although fires and floods have had an impact on claims, loss ratios for Europe in 2023 appeared to be more positive than in recent years. Loss ratios in other regions were also enjoying an improvement since 2019. The overall claims impact remained stable.
In general, Cargo insurance was enjoying improved results and a long-awaited period of positive stability. That said, a number of perennial issues will continue to impact including large vessel fires, mis-declared cargoes, accumulation of risk, severe weather events and geopolitical instability.
Ocean Hull
The Ocean Hull sector reported global premiums of USD 9.2 billion representing a 7.6% increase from the previous year. Europe commanded the largest share at 51.8% followed by Asia/Pacific (35.5%), Latin America (7.6%), North America (4.3%), Africa (0.6%) and Middle East (0.3%). The UK, China and Latin American markets had all experienced an increase in share during 2023 whilst the recent (and dramatic) rise in the Nordic market now appeared to have stabilised.
A return to normal shipping activity following COVID had a positive impact on vessel values in most classes and a higher demand for vessels had driven up the global premium base. This was particularly true for offshore support vessels whose values had risen significantly following a stable oil price and a reactivation of offshore activities.
Previously, there was concern over the large gap between total gross tonnage/number of vessels and global premiums which had opened markedly between 2011-2018. This gap began to close slightly from 2020 and, in 2023, had continued to reduce.
Following post-COVID reactivation, the frequency of hull claims showed some increase but had not yet exceeded pre-pandemic levels. Total loss frequency also showed a slight recent increase but remained at a very low level. The claim cost per vessel increased somewhat and in 2023, for the first time, exceeded the pre-COVID level. This was mainly due to increased major loss impact, particularly from costly vessel fires, which remains an ongoing issue.
Overall, 2023 was a positive year for marine underwriters with market development seen across all lines of marine insurance business. World trade continued to grow which impacted positively on the global premium base, particularly for cargo insurance. The oil price appears to have stabilised which is good for the offshore sector. Inflationary pressure has eased and many central banks are beginning to cut their interest rates.
…Jun Lin, Chair of IUMI’s Facts & Figures Committee said.
