Delegates attending the annual gathering of the International Union of Marine Insurance (IUMI) in Toronto have been told their industry has been commoditised and is in urgent need of modernisation.
IUMI president Richard Turner opened the event yesterday by identifying the current painful period of adjustment that most insurers are facing.
“For many years, supply has outstripped demand and a sustained period of unprofitability has resulted in a reduction of capacity. Coupled with this is the worrying trend of commoditising our products and transferring individual policies into bundled facilities. A sad corollary is the loss of expertise jettisoned in the short-term pursuit of reducing costs,” Turner said.
The IUMI head went to urge the sector to bring some of its archaic processes into the 21st century.
“Some of our clauses were written decades ago and well before the modern digital age. We need to re-think the coverage we offer and how we react to claims situations. We also need to utilise all the digital tools within our grasp to enhance the way we assess and price risk. Technology will drive a recalibration of the skill-sets required for more effective underwriting,” Turner said.
During a busy opening day at the IUMI event, Sean Dalton, chair of the association’s cargo committee, reported a 2.5% increase in 2018 global premiums to $16.6bn – numbers that failed to hide the red ink that has been washing through the sector in recent years.
“On a global basis, the cargo line is unprofitable and has been for a number of years. Premiums have not been technically adequate to cover losses and expenses and, as such, have not delivered an acceptable return for capital providers. A significant reason for this ongoing situation is the commoditisation of this speciality line of business which has lowered entry barriers and attracted new entrants, some of whom are now exiting,” Dalton said.
Elsewhere yesterday it was revealed marine underwriting premiums for 2018 were recorded at $28.9bn, a single percentage point rise from 2017.
Philip Graham, chair of IUMI’s facts and figures committee, summed up, saying: “The hull and cargo markets appear to have bottomed-out and we are beginning to see a modest uplift, albeit from a low base. Profitability is likely to be pressured by the recent return of major losses, however. More activity in the offshore energy markets is also good news, but reactivation of units adds to the overall risk profile.
“In short, the marine underwriting sector is characterised by uncertainty. At a macro-level this is created by political, economic and environmental factors; and at an industry level it is due to accumulations, a worrying and increasing incidence of major losses; and through a reactivation of the offshore sector.”