LINE OF BUSINESS OVERVIEW | MARINE
2018 was a year of upheaval in Marine, notably within the Lloyd’s cargo arena, as syndicates and company markets attempted to deal with issues that have plagued the sector for some considerable time. After a string of unprofitable years, this upheaval came as no surprise to the experienced players such as ourselves who have been arguing for more market rigour in technical underwriting.
The year itself started badly for the cargo market with the shipboard fire on the Maersk Honam (a 2017 built container ship), in which approximately 2,500 containers (circa 3,750 TEU) were destroyed, with final values and claims still to be resolved at the time of writing.
This loss set the tone for a growing concern in the cargo market over the spate of shipboard fires throughout the year, including the Yantian Express and the Grimaldi Grande America. Although different types of vessels (a container carrier and a roll-on, roll-off cargo vessel respectively), the issue of cargo in containers being mis-declared was once again a huge challenge for all parties active in the Marine sector.
The prevalence of fires was not limited to on board incidents, as the market also suffered three large losses on stock throughput accounts, with estimates of USD45m, USD80m and USD100m for the individual losses.
Aside from the market losses, there were significant changes within the dynamics of Lloyd’s – still the dominant market in Marine. Foremost amongst these were the non-renewal or dismantling of long-established broker binders that were historically supported by Lloyd’s markets. Once the true results of these binders became apparent, many found them to be unacceptable and moved the business to the open market, where prices have been pushed up to realistic levels.
The challenge of excess capacity within Lloyd’s now appears to be reducing as several syndicates are withdrawing from the cargo space and aligning capital with other sectors that they feel will generate a greater return. The company market is proving itself more than able to match clients’ requirements for coverage and capacity. Furthermore, there has been a marked shift in London market underwriting philosophy to higher technical standards and a diminished emphasis on top line growth.
Looking forward to 2019, we see more of the same; business moving to the company arena, pricing reflective of exposure rather than designed to satisfy budgetary requirements, and the potential for more major losses due to both increased natural catastrophe perils and larger vessels carrying more goods across the world’s oceans.