Insurers in the marine market could get their fingers burnt, finds Andrew Holt
It is hard to find any corner of the marine insurance market where rates are not softening and profitability is under severe threat yet there is no sign of capital withdrawing its capacity. Why then do insurers continue to flood the marine market, disregarding the laws of supply and demand?
As the unprecedented good times for shipping continue, the hull and machinery sector is seeing increasing consolidation and IPOs resulting in larger combined fleets and greater purchasing power for insurance buyers.
In a timely publication, the Willis Marine Market Review warns that while the continuing high demand in the supply chain may be boosting the overall tonnage and therefore the premium base, it could potentially be camouflaging the erosion of good underwriting in an already marginal business.
It appears that many insurers are clambering for a piece of the action offering unrealistic and unsustainable rate reductions.
The review concludes that competition will continue to increase with insurers attempting to defy the rules of supply and demand – resulting in some fingers getting burnt.
Alistair Rivers, chairman of Willis Marine, warns: "It is a time for assureds to carefully examine the performance and financial strength of the insurance carriers they intend on using.
"Willis has already recognised this growing requirement with the soon-to-be launched Willis Quality Index that will benchmark a wide range of insurers’ service and performance measures to help our clients make more informed decisions."
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