The International Marine Insurance Union (IUMI) today (September 19) presented its analysis of marine insurance market trends in 2021 at its annual conference in Chicago, USA.
The IUMI Global Marine Insurance Report shows that global marine insurance premiums increased by 6.4% compared to 2020, reaching USD 33 billion in 2021. Driven by a combination of increased global trade volumes, d he stronger US dollar, increased offshore activity and higher vessel values, premiums for freight, hull, offshore energy and marine liability increased in 2021. Europe’s insurers and Asia in particular recorded premium growth.
Regionally, global revenue was split: Europe 47.2%, Asia/Pacific 29.3%, Latin America 10.3%, North America 7.7%, Other 5.5%.
By branch of activity, cargo continues to represent the largest share with 57.4% in 2021, hull 23.5%, offshore energy 11.8% and maritime civil liability (excluding IGP&I) 7, 3%.
Vice-Chair of the IUMI Facts & Figures Committee, Astrid Seltmann, explains:
“Building on the gains made in 2020, 2021 was another positive year for marine insurers. It was the year that global trade experienced a timid recovery, absolute premiums increased, the impact of claims was mild and, as a result, loss ratios improved. However, this position is tempered by the economic uncertainties facing the world today. We report this data at a time when several shocks have hit a global economy already weakened by the pandemic. There is no end in sight to the war in Ukraine, soaring global energy costs and inflation, a bleak outlook for trade and the possibility of further climate and pandemic-related disruptions . Marine underwriters face extremely complex issues.
Energy at sea
Global offshore energy premiums continued to rise in 2021, reaching USD 3.9 billion, a 6.9% increase over 2020. This is the second consecutive year increase, after a period of decline of six years (2014-2019). Demand for offshore energy insurance generally follows oil prices as projects become viable. Historically, there is an 18-month lag between oil price improvement and authorized offshore spending and reactivation of units. Oil prices remain high, but volatile.
Lloyd’s of London and the International Underwriting Association (IUA) continue to dominate the market, with 33.2% and 32.1% market share respectively.
In 2021, claims were lower than premiums received. However, a shadow still hangs over the offshore energy market in the form of potentially large unquantified losses yet to come from 2019.
The global premium base for the freight market for 2021 reached USD 18.9 billion, up 9.9% on the back of a stronger dollar and increased global trade volumes. The freight premium reflects the value of goods transported and world trade volumes.
However, in July 2022, the International Monetary Fund released a pessimistic forecast for global economic growth to slow from 6.1% last year to 3.2% in 2022.
Loss ratios in most markets have continued to improve due to increased premium volume in combination with the recent impact of minor claims. For Europe, the gross loss ratio for the 2021 underwriting year is expected to end at 50%, while other regions reported the following loss ratios for the 2021 accounting year: United States: 41% (claims incurred), Asia: 45% (claims paid only) and Latin America 43% (claims paid). A return to pre-Covid business in 2022 is likely to increase the impact of claims on underwriting performance.
Cargo insurers continue to face persistent challenges including an increase in cases of onboard fires, misdeclared cargo, worsening extreme weather conditions including stronger winds and waves, floods and fires of forest. With the increase in value accumulated on ever larger vessels and unique port sites, the risk of losses related to major events continues to grow.
Global ocean hull premiums increased in 2021 by 4.1% to $7.8 billion. There has been continued strong growth in the Nordic region as well as in China, but much weaker in the UK market (Lloyd’s) where the decline of recent years has continued.
The overall value of insured vessels increased significantly in 2021, mainly due to the sharp increase in container ship prices which increased by more than 35%. The values of dry bulk and general cargo vessels also saw gains in 2021, but all other segments were down.
After a lackluster year for claims in 2020 when shipping activity, particularly in the high-value cruise sector, declined, 2021 saw a slight increase in Hull & Machinery claims. However, complaints remain low. Total losses amounted to 0.06% and partial losses to 0.14% of the total world fleet. The cost of claims per vessel increased slightly compared to 2020, but remains at historically low levels. However, rising steel prices and labor costs are expected to impact future hull claims.
As reported in previous years, the frequency of fires on board, both in the engine room and in the cargo areas, continues to cause concern, particularly for car carriers and container ships. Fires occurred on more than 1% of the containership fleet in 2021, with 0.4% of the fleet experiencing fires resulting in more than USD 500,000 in losses.
In terms of technical profitability, the results show continuous improvement. Gross loss ratios for the 2021 underwriting year for Europe are expected to end at 65%. This includes some expected increase over 2020, which performed extraordinarily well due to the combination of higher premiums and extraordinarily low claims impact in 2020 due to the effects of the pandemic, in particular reduced vessel activity in certain segments. Loss ratios for FY 2021 reported for other regions were: United States: 70.5% incurred claims) Asia: 67% (paid claims) Latin America: 54% (paid claims). However, a return to full shipping, increases in value, inflation of various costs impacting repair costs, new ship designs, propulsion and fuel types are likely to impact on future claims trends.