IUMI Concerned about Global Marine Underwriting

The increased risk of large, more complex and costly claims has the potential to impact all marine underwriting sectors in 2019, said the International Union of Marine Insurance (IUMI).

Although the global fleet continued to grow at around 3% in 2018, the number of total losses (vessels over 500GT) stood at a 20-year low. Only 21 total losses were recorded last year and this is on the back of a general downward trend witnessed since 2010. The reduction was seen across all vessel classes.

Serious casualties (excluding total losses) have stabilised over the past three years but are still higher, on average, than in 2014. There is likely to be a spike in Q1 2019 when numbers have been finalised. 900 incidents were recorded in 2018 representing 1.6% of the global fleet (or 1.2% in GT).

Rama Chandran, Chairman of IUMI’s Ocean Hull Committee commented: “We are pleased to see a stabilisation in total losses and serious casualties and this is a clear indication of an enhanced safety culture, improved vessel design and more effective regulation across the industry. Statistics show total losses of younger tonnage (<15 years) are dramatically lower in 2014-2018 than in 2009-2013. Underwriters welcome the industry’s overall improvement in safety but also recognise that increasing size, scale and complexity of new tonnage is affecting the current risk profile.”

On the back of a slowdown in global economic growth (forecast to reduce from 3.2% in 2018 to 2.8% in 2020), the WTO is expecting growth in global trade to scale back to 3.7% this year (from 3.9% in 2018). As a result, the outlook for shipping is mixed.

Container trade is expected to grow by 4.8% in 2019 against a fleet growth of just 2.6% which indicates a modest recovery in rates. However, factors such as a downturn in the economy, increased tariffs and rising fuel costs have the potential to put the brakes on any future upturn.

Dry bulk trades are forecast to grow on average by 3.2% against a fleet growth of 2.7% which bodes well for a modest uptick in rates this year, albeit from a low base.

Nat cat losses in 2018 were lower than in 2017 but were significant nonetheless and included hurricanes Florence, Michael and typhoon Jebi. The fire on Maersk Honam in March 2018 is likely to be the largest General Average loss in history.

Of growing concern is the recent spate of shipboard fires including Sincerity Ace, Yantian Express, APL Vancouver, ER Kobe and Grimaldi Grande America.

Whilst IUMI cannot speculate on the causes of these fires, past issues such as cargo mis-declaration, improper packing, loading, labelling and shipping of hazardous cargoes are likely to be factors.