The International Union of Marine Insurance (IUMI) has published its 2021 analysis of the global marine insurance market. The report presents a range of statistical data to give an insight into the marine insurance market within the context of global trade and shipping.
Global premiums reported from the offshore energy sector in 2020 were USD 3.6 billion representing an 8.6% increase on 2019. Premium income mirrors the global oil price and it is thought that the bottom of the premium decrease cycle has been reached and that income is now on the rise. However, the oil price remains volatile and was impacted negatively in 2020 due to the pandemic. 2021 has seen an oil price rally but the effects of events such as Hurricane Ida are yet to be known.
The IUMI 2021 Stats Report shows that claims in this sector also remain historically low, with 2020 likely to produce the lowest upstream claims this century. The low claims environment coupled with a relatively modest premium base has maintained the offshore energy sector in a fragile balance. The recent oil price increase is driving renewed activity and re-activation in the sector which will lead to more underwriting demand.
Although there appears to be a strengthening of the offshore energy market, the long-term outlook remains uncertain at this point. Additionally, offshore energy underwriters are expanding into new, related businesses such as offshore wind and aquaculture which may boost their portfolios.
The global premium base for the cargo market for 2020 was reported to be USD 17.2 billion, which is a 5.9% increase from 2019. According to the report, exchange rate fluctuations impact most heavily on this sector and so comparisons with earlier years cannot be exact.
The fortunes of the cargo market tend to follow trends in world trade and predictions from the IMF are optimistic. Global trade appears to have returned more strongly than expected post the outbreak of COVID which lends a positive outlook for business opportunities within the cargo market going forward. Loss ratios have improved in 2019/2020 returning the cargo sector to technical break-even for the first time in many years. The past decade was characterized by a number of large claims caused by weather and navigational events and this impacted negatively on loss ratios.
In particular, the accumulation of risk continues to cause concern. The trend of storing large amounts of cargo at single sites or on single vessels exposes high values or man-made events that could easily result in costly claims.
Global premiums regarding the ocean hull sector increased in 2020 by 6% to USD7.1 billion. Growth was particularly strong in the Nordic region but much weaker in the UK (Lloyd’s) market where the decline in recent years continued. The gap between average vessel size and insured value which began opening in 2014 now appears to be closing slightly. Similarly, the gap between global fleet size and global premiums which had been increasing since 2012 still exists, but it now appears to have reduced slightly.
If sustained, this is good news for the hull market. More good news stems from the continued low level of claims frequency and total losses. Although a slight increase in 2021, claims impact remains extraordinarily low. There is concern, however, that low levels are the result of reduced shipping activity in connection with COVID, particularly in the cruise sector, and that the current recovery might see claims return to more normal levels in the near future.
In general, loss ratios for 2019/2020 have improved across all regions returning the ocean hull market to a technical break-even position after experiencing many years of unsustainable results. Shipping’s return to full activity might negatively impact that position, however.
Of particular concern is that the frequency of onboard fires does not decline contrary to the overall claims frequency the report notes. This is particularly true for large container vessels. Statistically, these vessels are more prone to fire due to the large quantities and variation of cargo being carried; as well as the challenges inherent in fighting a fire on such a large vessel at sea.
Download the report: IUMI Stats Report 2021