Rising claims, inflation gnawing away at profitability, the war in Ukraine and the climate emergency were all addressed on the opening day of this year’s International Union of Marine Insurance (IUMI) annual conference in Chicago.
Addressing the 585 attendees president Richard Turner said: “The growing climate emergency, the rise of protectionism affecting international trade and the emergence of data and technology as a driver of huge change in all sectors have different ramifications for the world, international trade and by extension for us as a marine insurance sector.”
Turner spent some time discussing how handling data is changing the face of insurance.
The 2022 outlook is worrying with increased losses and flattening of rates
“It is no exaggeration to foresee that the whole operation of our sector will be revolutionised by the harnessing of better data and the opportunities presented by digitalisation,” Turner said, adding: “Many of the more repetitive human tasks in our industry will increasingly be managed with AI or software. The whole concept of what it means to be an underwriter, a claims practitioner, or a surveyor – all of these roles will be updated. This activity need not be to the detriment of client service. In fact, some of the new digital capabilities offer the prospect of better service and even new forms of coverage.”
Also speaking on the opening day of the annual event, Rama Chandran, chairperson of the ocean hull committee expressed concern over the long-term sustainability of the hull and machinery insurance sector.
“Whilst it is encouraging to see the 2021 premium base growing from the previous year we face deteriorating loss ratios, albeit from a low 2020 base. Premium base has only recently begun to creep upwards following a sustained decline since 2012,” he said, noting the increase of 4.1% is lower than the 6% seen last year. Chandran described the reducing quantum as a “worrying trend”.
The first half of 2022 has seen an increase in claims primarily caused by increased activities and inflation with higher steel prices, higher cost of spares, and labour costs.
“As shipping activity returns to pre-covid levels, it is inevitable that we’ll see a rise in claims,” Chandran said, adding: “The 2022 outlook is worrying with increased losses and flattening of rates. Inflation could tip the profitability curve and see more capacity withdrawn.”
In addition to long-term sustainability, IUMI’s ocean hull committee has identified three major concerns for the coming period, namely inflation, fires on boxships and the path towards decarbonisation.
“Cargo insurers continue to face persistent challenges including rising cases of onboard fires, misdeclared cargoes, worsening severe weather conditions including stronger winds and waves, floods and wildfires. With the increased value accumulation on ever larger vessels and single port sites, the risk of large event losses continues to grow,” a release from IUMI stated.
