Sector faces another tough year following Costa Concordia and the continuing piracy problem
2012 will be another difficult and uncertain year for the maritime industry, according to Willis Global Marine.
The hull market is in a state of flux following the Costa Concordia disaster in January, it reveals in its latest marine market review.
Some underwriters in the London insurance market, which will bear the majority of the estimated $500m hull claim, are adamantly refusing premium reductions or even flat renewals. However, unaffected underwriters in the Far East and Scandinavia are more open to negotiation.
Marine liability underwriters meanwhile are hoping the disaster drives through a general hardening of rates, with many seeking five percent increases going forward.
The impact of piracy also continues to blight the shipping industry with no clear resolution in sight.
The security measures taken by ship-owners are increasingly effective with less than 20% of attacks successful in 2011. However, this has only served to increase the demands and expectations of those attacks that do occur with total ransoms increasing 77% from 2010, according to Control Risks.
Nevertheless, cargo insurance buyers continue to enjoy the benefits of a soft market. Despite ever-dwindling returns to insurers, competition for business remains fierce with a flurry of new entrants creating excess capacity.
“For many marine insurers the year began badly with the loss of the Costa Concordia cruise liner,” said Willis Global Marine chief executive Alistair Rivers. “It was a timely reminder that 100 years on from the loss of the Titanic, disasters on this scale are still possible despite all the industrial and technological advancements. But while this loss may have stiffened the hull market, the long term impact is questionable. The P&I and liability aspects of this loss will be of far greater significance to insurers as matters evolve throughout the year.
“However, a truly hard market is a mirage as long as capital providers are prepared to tolerate marginal returns from their hull and machinery book.
“These are difficult times for the maritime industry: world shipping is in recession; the economic turmoil continues to dampen demand; pirates are seizing property and crew; and increased sanctions demand further resources and attention. But maritime trade has seen and overcome similar challenges in the past and the entrepreneurial spirit that drives the industry remains intact.”