Cargo insurance premiums ‘dropping off cliff,’ IUMI told
- Worldwide softening of rates
- Niche suffering from ‘lack of talent’
- Ever-changing tariff outlook making underwriters nervous
Turnaround looks likely after stability in decade to date, warns Brews
CARGO insurance premiums are set to slide after an extended period of stability, the International Union of Marine Insurance has been told.
The warning from Mike Brews of South Africa’s Horizon Underwriting Managers was delivered at the organisation’s annual conference in Singapore this morning.
His conclusions are in line with both recent research from brokers and Lloyd’s List interviews with senior figures in the niche, which suggests that rates have been softening of late, thanks largely to increased competition.
Broadly speaking, cargo has been a profitable niche in recent years since an earlier nadir reached in 2017, with the subsequent Lloyd’s of London’s Decile Ten purge of underperformers doing much to restore its fortunes.
But the return to the black has inevitably attracted new entrants, often in the shape of managing general agents, and Gallagher estimates that capacity now stands at $1.5bn worldwide.
Brews told IUMI delegates that the last five years have been characterised by stability, with no major drop-offs in premiums. But it is unclear how much longer this situation will last.
“We have seen increased capacity. Those who have already got capacity are using that capacity over a wider network, making sure they have a wider reach in where they are generating their business.
“We’re starting to see the softening of rates in multiple markets already. In fact, if you speak to some people, they say they’re dropping off a cliff. We are seeing a worldwide softening of rates.”
While the decade to date had seen occasional hefty losses — including natural catastrophes known as “nat cats” in insurance jargon — there had been none that could be described as exceptional, Brews said.
Another potential problem for the class was recruitment, he added.
“With the softening of the market, our age-old friend lack of staff and talent is rearing its ugly head.
“We are often seeing people move around markets or from one company to another and the problem is, there’s always a hole left behind.
“That hole just gets filled by another one and the merry-go-round carries on until the music stops.”
Tariffs have been an issue of major concern over the last year or so, and the precipitate chopping and changing of tariff rates by some governments is making many underwriters nervous.
The so-called front-loading of US imports, as buyers rushed goods in to beat tariff deadlines, led to an increase in both accumulation risk and theft risk.
Pricing also has to factor in armed conflicts and changing weather patterns.
