Inside IUMI 2016 - Charting a Course to Counter Industry Pressures
Last week, over 500 of the world’s leading Marine underwriters gathered for the 142nd conference of the International Union of Marine Insurance (IUMI) in Genoa - a fitting location given the Italian harbour city’s illustrious history in marine insurance.
The overarching theme this year was “Effective Underwriting in a Changing Environment” and the opening address emphasised the need for the industry to innovate in order to counter the challenges it faces. These were grouped into three categories:
- The fragile economic environment (including geopolitical uncertainties, fiscal policy, world trade and regulatory changes)
- The changing business environment (covering pressures on ratings, M&As, big data and digitisation)
- Effective underwriting (comprising costs and distribution, models and aggregate management)
The IUMI Facts & Figures Committee’s presentation on the market outlook is always a core part of the annual conference. Headline figures included:
- Global marine inurance premium in 2015 was USD29.9 billion (down 10.5% on 2014), along with the correlating trend of reduced values (ongoing since 2008).
- For Cargo, 2015 premium was USD15.8 billion (down 9.1% on 2014). The expected ultimate gross loss ratio for 2015 starts higher than 2014 and is expected to deteriorate further with the after effects of the Tianjin explosion. This is a trend likely to continue in 2016 following the Hanjin collapse and Amos-6 satellite loss already this year.
- For Hull, 2015 premium was USD7.5 billion (down 8.4% on 2014), despite the world fleet continuing to grow in gross tonnage. The ultimate loss ratio in 2014 deteriorated more than average and 2015 is impacted by major losses and worsening premiums. Better news is that total loss frequency seems stable in the long term and is even expected to show a downward trend.
- Overall, Offshore Energy was down 20% in 2015 and the loss ratio severely weakened due to a number of major losses - with seven exceeding USD100 million.
Despite these sobering figures, there was a positive note as the attendees came togther in the break out sessions to discuss pragmatic ways to respond to the challenges. Better catastrophe and aggregate modelling, growth in intelligent systems and the use of big data were just some of the themes discussed.
Of the workshops, the Energy session was particularly well attended. This is perhaps unsurprising given the serious challenges facing the offshore energy insurance sector following the drastic and prolonged reduction in the oil price, resulting in reduced activity, cancelled contracts, and the stacking of rigs. It was revealed that upstream energy insurance capacity has increased approximately 50% since 2010, while asset-insured values are moving in the opposite direction. Rates are now at late 1990s levels - approximately half what they were in 2012.
In the Hull workshop, the main focus was on car carriers and the unique risk they pose, as well as learnings from recent losses, such as the Hoegh Osaka. Insurers were educated on the importance of vessel stability, crew training and cargo lashing requirements that can help to mitigate risk.
In the legal and liability workshop, an interesting talk on unmanned ships - and how they fit into the maritime regulatory framework - provided real food for thought. Autonomous technology is already here (see my presentation on port automation), and the existing legal framework will need further clarification if it is to apply, certainly around areas such as crewing requirements, collision avoidance and personnel training. The challenge will be to develop best practices in unmanned operations in order to make it happen.
The full conference programme is available on the IUMI website where links to each of this year’s presentations can also be found. Next year’s conference will be held in Tokyo, from 17 – 20 September.