State of the Ocean Marine Reinsurance Market 2014


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Marine insurers face challenging headwinds in 2014. The recent past provides multiple reminders to underwriters that natural catastrophes affect Marine just as they do Property risks, as highlighted by the disproportionately high number of insured losses from Superstorm Sandy paid by Marine insurers. In addition to this new concern and the steadily deteriorating global results across Cargo, Hull, and P&I lines, Marine insurers also face four emerging underwriting trends that could change the rules of the game going forward.

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State of the Ocean Marine Reinsurance Market 2014

  1. 1. 4 Marine Insurers Should Watch For in 2014 4 emerging underwriting trends that could change the rules of the game going forward…
  2. 2. Emerging Trend 1: Increasing vessel size
  3. 3. The 2013 Triple E Maersk class container carrier is 399m (l) x 59m (w) x 73m (h) 16% larger than the previous world's largest Maersk Mc-Kinney Moller It can carry up to $1.8 B in cargo values Source: equivalent in length to 15 blue whales
  4. 4. This larger size means an increase in risk Source: London Salvage Conference, December 2012 The ability to fight fires onboard is unknown No salvage plan exists to unload such a ship at sea in less than 6 months
  5. 5. Does such a vessel merit a lower than average rate...or higher? Risk Risk Risk Risk Risk Risk Normally new, higher TIV vessels get cheaper rates, but in this case we are talking about more risk
  6. 6. Emerging Trend 2: Escalating Removal-of-Wreck Costs
  7. 7. 1999 2008 33 55 Large-scale wreck removals increased from 33 to 55 per year
  8. 8. Cost of each removal is rapidly rising due to: $ Larger and more complex vessels $ Overconfidence of salvage companies $ GLOBAL awareness and transparency of environmental impact $ Politics $ Lack of qualified resources in many world regions
  9. 9. Emerging Trend 3: Shipping across Arctic waters
  10. 10. Charts are improving, but are still imperfect Limited experiential data means more decisions based on intuition No standard requirements for ship design A new frontier Shortage of qualified crew Unknown post-loss response means smaller initial losses could easily escalate if no local response
  11. 11. Emerging Trend 4: Misuse of Catastrophe modeling
  12. 12. catastrophe modeling Commonly misused or misinterpreted Helps with risk selection & pricing of individual accounts Facilitates more active portfolio risk management Too easy to "outsource" underwriting decisions to modelers Effectiveness of market models on marine risks can vary
  13. 13. Ocean Marine insurance business faces great uncertainty as we head into 2014 Major underwriting concerns affecting Cargo, Commercial Hull, P&I, and Recreational Marine lines Conclusion Little room for error Greater frequency of severe losses globally Loss ratios continue to climb in many world regions due to loss activity and rate reductions
  14. 14. to discuss underwriting and new product possibilities p +1 203 328 5748 e in /in/jonathanfball t @Jonathan_F_Ball This presentation is intended to provide background information to our clients and professional staff. It is time sensitive and may need to be revised and updated periodically.