testata inforMARE
27 November 2022 - Year XXVI
Independent journal on economy and transport policy
13:03 GMT+1
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FORUM of Shipping
and Logistics


The Marine Insurance markets
in 2000

 
Turning the corner

top

The year 2000 has been a turning point for marine insurance, coming between a period of significant low rates which began in 1995, and a steady increase in rates which were first felt in the first half of this year.

The published results of insurers for 1999 and the updating of their 1998 figures were catastrophic and created a shockwave throughout the market. By year end 2000 the IUMI (International Union of Marine Insurers) reported that premiums for 1998 totalled some US$ 12.7 billion whereas in 1999 the figure was only US$ 10.7 billion. In the French market the 1999 underwriting results for 'foreign hulls' give a claims versus premiums ratio of 165.7%, for the French Hull market 109.%, and 87.3% for cargo insurance.

Lloyds, who normally only publish their results three years after closing their accounts, predict a loss of '830 million for 1999, and have upped their loss forecast for 1998 from '725 million to '962 million.

In Scandinavia the new company IF''', which combines the activities of the Swedish group Scandia and the Norwegian Stonebrand, have announced a loss of 212 million Swedish Krona for 1999, whereas the Swedish Club predict a loss of US$ 4.0 million.

These results are not exactly comparable in that they do not all represent the same coverage; business and maritime risks in some cases, and purely maritime in others. The tendency is nonetheless clearly visible and points to very significant losses. It is not surprising to learn therefore that during the course of 2000 a number of substantial players in the insurance sector have disappeared, notably Jonathan Jones, CGNU, and Reliance.
 

Hull and machinery

top

The Y2K bug was quickly forgotten. During the renewing of contracts concerning the 'commercial fleets' in the first half of 2000, owners were able to lower rates with reductions of some 10 %. Long term contracts and their extensions continued to enjoy a large success.
 
insurance hull


After a period of uncertainty between June and September 2000, the market began to show signs of firming up as exemplified by an increasing difficulty in prolonging term contracts and by the substantial increases obtained on fleet losses.

As in the previous cyclical reversals, the English market reacted more quickly, if not always as consistently as their French and Scandinavian counterparts. Despite the adjustments needed to take account of this reversal, the "commercial fleets" has always managed to find 100% coverage for its needs.

By end 2000 the insurance market for "commercial hulls" remains relatively oversupplied, but the less attractive ships or fleets, either due to their inherent conditions and/or their results, are beginning to face a real problem in obtaining cover.
 

Energy and related risks

top

The developments of deep offshore markets in West and Central Africa and notably Angola have absorbed a significant share in the available insurance capacity, particularly in the North American market. The development of deepsea pipeline projects up to 2000 metres, with the introduction of "J" platforms, have led some underwriters to hold back in light of the new technological risks. Capacity is becoming tight in this sector of the market, even though the statistical results are relatively balanced at least within the French context.
 
Fishing

top

In line with the "marine hull", the fishing insurance sector has followed the down cycle over the past six years, but somewhat attenuated for two reasons.

  • the risks inherent in operating fishing vessels have proved greater than for traditional hulls,
  • the specialised insurers in this sector are fewer, so the competition is not as intense.

The firmness in the market was noticeably felt as from September 2000. At the same time owners encountered other serious problems :

  • a hike in the price of gasoil from US$ 120/ton to US$ 370/ton in less than a year.
  • imposed biological layups in certain zones from two to four months per year.
  • a drop in fish prices (cf. the tuna crisis, in article "The Fishing Vessel market")

This situation did not allow for increases in the insurance premiums and the market moved towards tailored-made arrangements where the product had to adapt to charterers' specific needs and what they could pay, generally making terms of insurance more restrictive.
 

Cargo insurance

top

The trend within the "cargo insurance" market in 2000 was multifaceted. In line with the 'foreign hull' market, cargo insurance risks in the trading sector experienced a reversal in the market, with the same causes (excess competition) producing the same results (substantial technical losses). Likewise in the heavy-lifts transport sector, recent catastrophic disasters have resulted in sharp losses due principally to a reduced capacity within the English market.
 
insurance cargo
The other sectors within cargo insurance proved to be tentative, caused no doubt by the insufficient returns during 1999. The healthy and constant progress within the container fleet and the significant increase in traffic which has ensued, seems to have had a positive impact on the loss claims, which has helped compensate in part the lower rates being achieved.
 
Protection and Indemnity (P&I)

top

The trend of the "one stop shop" linked to the regrouping under one entity of both hull insurance and risk responsibility, is being accentuated. After Axa Corporate Solutions, the Swedish Club, DEX for the UK Club, and IF''' for Gard Services, AGF-MAT and Britannia have announced their imminent agreement, which would give AGF-MAT a predominant share in the management company of Britannia (Tindall Riley).

Changes both in restructuring and product innovation are certainly planned in anticipation of a development or possible disappearance of the "International Group Agreement".

The 'Erika' and 'Ievoli Sun' disasters made owners aware of their risks, and claims under charterer's liabilty were in strong demand.

The technical results of P&I Clubs also saw a marked deterioration, and with effect from October 2000 tariff increases for 2001 were announced.

The consolidation within the main players of the market seems to have slowed down, and "pools" are now emerging, which specialise in regrouping several middle-sized underwriters within specific areas. New technologies have so far had little impact on the business, but it is anticipated that a shake-up will take place in this sector shortly. Lloyds and IUA are working towards reorganising the London market to give a better service to clients, linked to the technical advantages of the internet.

The market is continuing to be restructured and with the change in cycles, is orientating towards a more technical approach to underwriting.

Apart from a few specialised sectors, the market is clearly headed higher. It is more than likely, however, that underwriters will take a more selective approach than happened on the last cyclical swing. In a relatively oversupplied market, a policy of sudden hikes in rates could have disastrous consequences.

In the long run the counter performance of the financial markets should strengthen this upward trend. The technical losses on policies which inevitably occurred in the early months of the accounts for 2000 cannot offset what the financial products achieved for insurers elsewhere. Marine insurers must wait until 2002 before being able to show any positive results.
 




Shipping and Shipbuilding Markets in 2000

I N D E X

›››File
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SAILING LIST
Visual Sailing List
Departure ports
Arrival ports by:
- alphabetical order
- country
- geographical areas
Nel 2021 il traffico delle merci nei porti dell'UE è aumentato del +4,1% (-3,5% sul 2019)
Bruxelles
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DATABASE
ShipownersShipbuilding and Shiprepairing Yards
ForwardersShip Suppliers
Shipping AgentsTruckers
PORTS
Italian Ports:
Ancona Genoa Ravenna
Augusta Gioia Tauro Salerno
Bari La Spezia Savona
Brindisi Leghorn Taranto
Cagliari Naples Trapani
Carrara Palermo Trieste
Civitavecchia Piombino Venice
Italian Interports: list World Ports: map
MEETINGS
Genova, workshop “Nuove energie ai porti”
Genova
Si terrà venerdì a Palazzo San Giorgio
Interporto di Nola, convegno su ZES e logistica
Nola
Si terrà il 3 novembre
››› Meetings File
PRESS REVIEW
Dollar crisis hits shipping sector as payment to MLOs face hurdles
(The Financial Express)
APSEZ forms JV with Gadot Chemical Terminals in Israel to buy Haifa Port
(Business Standard)
››› Press Review File
FORUM of Shipping
and Logistics
Relazione del presidente Daniele Rossi
Napoli, 30 settembre 2020
››› File
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