Marine insurance industry prepares for more risk
By Ira Breskin (gCaptain) –
The marine insurance industry is preparing for an expected increase in multi-dimensional risk across all product lines.
This is the consensus of many panelists speaking on Tuesday at the Americas Marine Insurance conference in New York.
Rising inflation is one of the most important emerging risks. This increases the cost of settling valid claims for maritime accidents and damaged cargo.
“Fundamentally, the cost of losses is going up,” said Sean Dalton, executive vice president, head of marine insurance at Munich Re. “The goal is to catch up, not follow,” he said.
“Undervaluation is a problem,” added Patrick O’Neil, general manager of Aon’s U.S. marine practice.
Specifically, speakers lamented that the industry faces new challenges as it no longer benefits from the low interest rate environment that began in 2008.
“The money has been free since 2008. It’s changing,” Munich Re’s Dalton said.
In fact, both the cost and frequency of claims for total payable construction losses and cargo damage are increasing, panelists said. This is due, in part, to unpredictable weather-related events.
Marine insurers offering worker injury protection to carriers have recently been “on the hook” for several “nuclear” and “thermonuclear” claims, said Molly McCafferty, claims director for the Americas at the American Club. It is a mutual protection and compensation.
Underwriters offering this coverage “face a different world over the last three or four years,” said Peter Cridland, vice president of Trans Re.
Mitigating the impact are increasingly successful efforts by insurers to convince appeals courts to reverse or reduce what carrier defendants claim are excessive indemnities.
Separately, more frequent late shipments are a growing but generally uninsured risk. Increased caution, exercised by merchant mariners who more frequently rely on third-party weather optimization services, is to blame for the delay, said Michael Venturella, practice leader for the marine group at Envista Forensics, a company forensic engineering.
And larger ships calling at congested major container ports, essentially “a single point of failure,” are also adding to those delays, said Charlie McCammon, senior vice president of risk consulting at Willis Towers Watson.
Ira Breskin is a senior lecturer at the State University of New York Maritime College in the Bronx, NY and author of The Business of Shipping (9th edition, 2018)an introduction that explains maritime economics, operations and regulations.