The International Union of Marine Insurance (IUMI) presented its analysis of the latest marine insurance market trends at its annual conference in Edinburgh, Scotland. All lines of business reported an uplift in their global premium base for 2022 with the total reaching USD35.8 billion, representing an 8.3 percent increase on the previous year.
Global income was split by region: Europe 47.7 percent, Asia Pacific 28.4 percent, Latin America 10.3 percent, North America 8.5 percent, and other 5.1 percent. By line of business, the largest share was commanded by transport/cargo at 57.3 percent followed by global hull 23.4 percent, offshore energy 11.5 percent and marine liability (other than P&I covered by IG clubs) 7.7 percent.
“Marine underwriters have suffered poor returns over several years but from 2020 results started to improve. 2021 and particularly 2022 have shown a relatively strong growth in the global premium base across all lines of business,” said Astrid Seltmann, vice chair of IUMI’s facts and figures committee. “In combination with a benign claims impact, this has translated into a much better performance in terms of loss ratios, specifically for hull and cargo. The reasons are complex but are likely due to the post-pandemic rebound in global trade coupled with reduced market capacity, particularly for hull.
“We’ve seen a continued strong performance from Europe after many years of decline but, while still increasing, Asian market growth appears to be slowing. But overall, the general trend for global premiums continues to be upwards. For sustainability, claims trends need to be monitored, being coupled with vessel activity, value accumulation, natural-catastrophe impact, the use of new technology and inflation impact on repair costs. In addition, fires continued to be a concern in 2022 and also into 2023.”
On the cargo front, insurance returned a global premium base for 2022 of USD20.5 billion, an 8.3 percent growth on 2021. There was growth in all regions especially in Europe and North America although the Asia/Pacific region experienced a slowdown, likely due to the combined effect of economic conditions and major Asian currencies weakening against the US dollar. That said, the changes in each region’s fortunes might also be connected with where the insurance contract resides, geographically. It should be noted that exchange rate fluctuations tend to impact most heavily on this sector and so direct comparisons with earlier years cannot be exact, said IUMI.
Cargo premiums have demonstrated positive market development over a number of recent years and, in the main, tend to follow the trends in world trade. Global trade, in terms of value and volume, rebounded strongly post covid and further growth is projected, however forecasts do differ.
Recent underwriting years, including 2022, have returned to a more normal (i.e., flatter) pattern in terms of loss ratios following a few years of extraordinary upwards claims adjustments. Loss ratios for 2022 are starting at their lowest level since 2015 and, although they will develop, this is positive and may indicate a sustainable improvement for this line of business.
However, cargo underwriters continue to be concerned with a number of persistent challenges such as mis-declared cargoes, vessel fires, accumulation of risk in single locations, climate change, and political tensions. Added to this, a return to pre-pandemic activity, inflation and the growing number of natural catastrophes are likely to impact the future claims environment.
Global premiums relating to the ocean hull sector increased by 5.7 percent in 2022 to reach USD8.4 billion. With the exception of Latin America which suffered a sharp downturn, all other regions reported an upturn. Whilst the distribution of premiums across the regions was relatively static, the Nordic countries enjoyed a marked increase, possibly due to their activity in covering war risks. IUMI said claims frequency had a long-term downward trend but has shown some increase after the extraordinary dip in 2020, following a return to pre-covid vessel activity. Average repair costs have seen some upward trend probably due to the impact of inflation. Major losses were moderate in recent years with the exception of fires but 2023 has seen an uptick including, again, a number of severe fires.
Global premiums in the offshore energy market for 2022 were reported as USD4.1 billion, an increase of 7.3 percent on 2021. IUMI said there now appears to be an upward trend in the premium base following a prolonged reduction to the bottom of the trough in 2019.
