Aon's Global marine market trends as at Q3 2015
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The document provides a quarterly market report on trends in the marine insurance industry as of Q3 2015. Key points include: - Rates have generally decreased across most marine product lines by 5-10% due to increased capacity and improved loss trends. - Cargo and hull markets remain very competitive with ample capacity. P&I renewals are also expected to be favorable. - Several insurers and brokers made leadership changes and expanded their marine teams and capabilities in various regions. - The outlook is that continued overcapacity will benefit clients through lower prices, but also increased competition and new product development in the industry.
Aon's Global marine market trends as at Q3 2015
- 1. Risk. Reinsurance. Human Resources. Marine Insurance Market Report Summary and Forecast Q3’15 Aon Risk Solutions Aon Broking | Marine
- 2. Aon Risk Solutions Marine Insurance Market Report | Q3’15 2 Market Trends as of Q3 2015 We have analyzed the global premium trends and capacity changes since Q2 2015 across the various marine products and provide our “Marine Market at a Glance” below: Marine market at-a-glance Rate Trend Rate Range % Capacity Trend USA Canada London Norway Continent Europe Asia Cargo* ↓ -10% to -5% ↑ ↑ ↑ ↑ ↑ ↑ Stockthroughput** ↓ -5% ↑ ↑ ↑ N/A → ↑ Blue Water Hull* ↓ -10% ↑ N/A → → → ↑ Blue Water P&I* ↑ Flat to + 5% → N/A → → → → Brown Water Hull* ↓ -10% to -5% ↑ ↑ ↑ → → ↑ Brown Water P&I, Liability* ↓ -5% ↑ ↑ ↑ → → ↑ Other Marine Liability - Primary* ↓ -5% to Flat ↑ ↑ ↑ → → → Other Marine Liability - Excess ↓ -5% ↑ ↑ ↑ → → → Ports & Terminals - Property** ↓ -5% → → → N/A → Ports & Terminals - Liability* ↓ -5% → ↑ → N/A ↑ Logistics - Cargo* ↓ -5% ↑ ↑ ↑ N/A → ↑ Logistics - Property** ↓ -5% → → → N/A → ↑ Logistics - Liability* ↓ -5% to Flat → → → N/A → ↑ Legend Increases ↑ Stable → Decreases ↓ * Higher rate increases for poor loss records or high valued vessels. ** Higher increases apply for CAT Zone property.
- 3. Aon Risk Solutions Marine Insurance Market Report | Q3’15 3 Hull Abundant Blue Water Hull & Machinery underwriting capacity and continued improvement in loss trends are driving favorable renewals for ship owning clients. Offshore supply boat layups is driving premium volume down for some markets, putting hull insurers under pressure to make their top line premium goals for 2015. Premium and rate reductions are commonly achieved for accounts with good loss experience. It was recently announced in Tradewinds and other publications that the Hellenic Hull Club will become the American Hellenic Hull Insurance Co., a new commercial venture owned by The American P&I Club. Initial intentions are to write hull business up to a $10mn subscription share, plus war risks and mortgagee’s interest covers. American Hellenic Hull Club will use its connections with both the Hellenic Hull Club and American P&I Club to build its portfolio of hull insurance business, with the longer term plan to emerge as a global Hull underwriting leader. London Market: Hull insurers granting reductions of five to ten percent, and higher for some larger accounts, where loss experience is favorable. USA: Navigators and XL Catlin remain as leaders, with additional potential support from Ascot, Endurance, and U.S. Fire. Dutch Markets: With regard to commercial cargo fleets (Dutch coastal and international) local and international markets underwriting from their Dutch offices tend to be very cautious with exceptions to prove the rule. There is more appetite for specialized offshore contractor fleets and shipyard business, traditionally well-developed niches in the Dutch market. The international capacity and loss trends in Hull also affect the Dutch playground with premium and rate reductions granted in all Hull segments, especially for those accounts with a good claims experience. London based Underwriting Agency Group DUAL started in Rotterdam earlier this year providing additional Lloyd’s Hull capacity to the local broking community. Nordic Market: The Nordic market is becoming more competitive as the local Nordic market has experienced losing shares to London and continental Europe the past year(s). In a struggle to maintain the position the Nordic marine underwriters have sharpened their pen. German Market: All in all there is sufficient capacity available in the German market. However, in the H&M insurance of medium size and big fleets, international capacity is imperative. The domestic insurance market seems to be very sensible and restrictive in respect of capacity offered to H&M accounts. Asia: The depressed rates on the Hull side continue for similar reasons as the London and other markets: excess hull capacity and unusual improved loss trends. There have been a number of underwriter changes in recent months affecting Argo, Allied World, Great American, QBE, Amlin, Beazley, XL Catlin and Standard Syndicate, who have now opened in Singapore. We suspect that these movements will only lead to further competition for market share. The Singapore War Pool has gained some profile members, although many owners are electing to use their usual War markets for continuity, service and equally if not more competitive pricing.
- 4. Aon Risk Solutions Marine Insurance Market Report | Q3’15 4 P&I The International Group of P&I Clubs are preparing their 2016 renewal plans. While it is too early to advise specifics, we expect generally favorable renewal conditions for shipowners and operators with acceptable loss ratios. • 2015 Investment returns are down, and in some instances may be negative based on mid-term indications from some Clubs. • Free reserves are at record highs, so despite expectation for poor investment returns we expect the Clubs with larger free reserves will weather the investment market changes. • With capital well in excess of solvency 2 requirements we will see more Clubs being aggressive. • More fixed markets now offering $1 billion in limits. • A number of clubs now have Lloyds syndicates including Standard. • 2015 reflected the lowest General Increases for many years and we can’t see that changing this renewal. • Likewise we are expecting the IGA reinsurance renewal will be favorable to members. • The individual Club retention layer will increase from the present $9 million to a level of $10 million at the 2016 renewal. • There may be some restructuring of the pool layers which may have an impact on Club contributions. Nearly all PI Clubs are now offering fixed entry Charterers liability products to include coverage for cargo and other liabilities, and these products are especially applicable to commodity trading firms. These fixed entry products are also aggressive for Brown Water PI in Asia. Brown Water and Hull and Marine Liability Capacity for writing primary liability and brown water business remains strong, thus rating remains competitive. In addition to strong traditional U.S. market appetite for this business, there are several London and other offshore markets which have recently opened in the U.S. and Canada to underwrite this class of business. Ascot hired a U.S. underwriting team to write this class, joining similar strategies employed previously by insurers including Aspen, and Endurance. There is an abundance of capacity (e.g., Water Quality Insurance Syndicate, Great American, Safe Harbor, and various London market cover holders) for vessel pollution coverage, resulting in some reductions. Excess marine liability and bumbershoot market pricing remains flat with sufficient capacity to complete most placement strategies, and with reductions possible for accounts with favorable claim results in the underlying primaries.
- 5. Aon Risk Solutions Marine Insurance Market Report | Q3’15 5 Cargo While the global economy is continuing to recover, there has been a recent slowdown in key emerging markets such as China, Brazil and parts of Europe. Disinflation and depressed sales in the major economies are reducing the reported cargo values for some cargo clients, depending on the sector. Depressed oil and gas prices may assist some sectors, but are depressing values for the energy sector. Cargo theft and disappearance remain the most problematic from a claims perspective. The loss at the Tianjin terminal in China has taken a toll on underwriters who currently write the marine cargo for the auto industry. A number of major auto manufactures had vehicles at the port when the explosion occurred and the amount of loss to affect the marine cargo market is still unknown. The loss will be significant to the marine market and may have some impact on auto accounts with static exposure. In general, the capacity to write marine cargo insurance is growing, and exceeds the needed supply. US and Canada Markets: Cargo markets remain under pressure to grow and accounts with good loss experience are seeing reductions, especially when marketed. Cargo Stock Throughput Programs (STP) remains competitive, especially as the lull in CAT losses continues. For large CAT risks, layered Stock Throughput Programs, where the marine market STP is primary to and integrated with the property placement, is normally the most efficient program design. Despite increasingly competitive property markets, Stock Throughput Programs remain a valid approach for insuring cargo for both transit and inventory risks. London Market: Cargo capacity has grown sufficiently to fully support placements with limits of $1 billion, with potential for higher limits. London cargo market maintains very significant STP capacity with still competitive limits for CAT losses. Dutch Market: For profitable accounts, there is still plenty of room for reductions on the cargo side. At the same time, there is much more serious attention paid to the loss-generating areas of the Dutch cargo book (commodities, perishables and logistics). Nordic Market: The Nordic market: is not very strong on international cargo. But over the last 12 months, Berkley has started working on slowly developing an international cargo book out of Oslo. German Market: The highly profitable cargo market has prompted many insurers – especially London insurers such as RSA and Torus -- to open branches and get direct access. As with other markets, the impact of additional capacity is driving down cargo rates for profitable business. Asia: There has been a continued softening market as a result of (i) new entrants to the market generating increased capacity (ii) senior personnel movement and (iii) a lack of major catastrophe events. Project cargo risks and bulk oil accounts continue to be a target area for the majority of the cargo market which has driven premiums down in conjunction with a small favorable movement in deductibles for buyers. Logistics accounts continue to enjoy competitive pricing, increased capacity, and emergence of new products and services. The noticeable exception to the softening trend is for clients in the automotive industry. Major losses both on vessels and shore side have impacted marine market underwriting appetite.
- 6. Aon Risk Solutions Marine Insurance Market Report | Q3’15 6 Noteworthy Market Movements • ACE/Chubb (US): ACE announced they will acquire Chubb. Both are strong marine cargo markets with global capability, as well as strong blue water hull capabilities in London. At time of writing, it is too early to know how this combination will affect marine staffing, capacity of capabilities for the new insurer. • Aspen (US): Hired Patrick Hickey (Zurich), Steven Weiss (Liberty) and Kelly Martinez (Lockton). • AmTrust (London): Hull underwriting leaders Peter Townsend and Lee Bright resigned from Swiss Re to join AmTrust. • Swiss Re (London): Andrea Cupido relocating from Genoa office to Swiss Re London office. Graeme Schultz has joined Swiss Re in NY. • Navigators (US): Hired Paul Boulos (XL Catlin) as Senior Cargo Underwriter in NY. • QBE (US): Hired Reese Lever (Zurich) in Houston, and with underwriting appetite for most marine products. Including admitted paper options. • Allied World (Asia): Tim Cook left (Marsh) to join Allied World as their Regional Head of Cargo (Asia). • Berkshire Hathaway (Asia): Julia Joes left (AIG) to join Berkshire Hathaway as their Regional Head of Cargo. • Berkshire Hathaway (Asia): Barton Philips left (Zurich) to join Berkshire Hathaway as their Regional Head of Marine Liabilities. • Zurich (Asia): Phil Webster left (Swiss Re) to join Zurich as their Regional Head of Cargo. • Great American (Asia): KK Chee commenced the start-up of Great American in Asia. • Watkins Syndicate (Asia): Tony Betteridge left (Liberty) to join Watkins Syndicate as their Global Head of Cargo. • Beazley Syndicate (Asia): Said Kahn left (Amlin Syndicate) to join Beazley Syndicate. • Amlin Syndicate (Asia): Rebekah Khew left (Beazley) to join Amlin Syndicate. • QBE (Asia): Ram Chandran left (Argo) to join QBE. • Argo Syndicate (Asia): David Lim left (Allied World) to join Argo Syndicate as Head of Marine. • Beazley (Asia): KH Song left (XL) to join Beazley. • Standard Syndicate (Asia): Commenced operations and recruited Wei Wei Tan from QBE. • Aon (US): In the last quarter we are pleased to welcome the following new marine team additions: – Kevin Khoury, Senior Marine Broker, Houston – Maggie Jacobsen – Associate Broker, NY – Kelsey Rowland – Associate Broker, NY – William Penn (Willis) – National Practice Leader for Marine Cargo • Aon (Asia): For movement of underwriting staff in Asia (Jochem/Eve)
- 7. Aon Risk Solutions Marine Insurance Market Report | Q3’15 7 Overall Outlook The maritime industry remains vital to global economic recovery with various marine sectors now seeing modest growth. Insurance markets and other capacity remain interested in providing marine product coverage and services. Continued overcapacity for most marine risks is causing soft market pricing and increased attention to new product development and differentiation. This will be particularly evident in Asia, where there are still opportunities in what is generically still referred to as an emerging market. All of this competition will benefit our clients, especially those that have had better loss records. Aon at a Glance Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Our global Marine practice, one of our dozens of specialized product and industry groups, places more than $3 billion in premium to marine markets, giving Aon unrivalled access to the top markets in the world. Through Aon’s more than 66,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon’s global and principal partnership with Manchester United.
- 8. Contacts Steve Beslity Chairman – Global Marine +1.212.441.1755 [email protected] Brent Chorney Marine Practice Leader – Canada +1.416.868.5795 [email protected] Heather Clarkson Head of Hull – London +44(0)20.7086.3908 [email protected] Robert DeMotta Marine Practice Leader – U.S. +1.212.441.1085 [email protected] Alexander Gibson Head of Marine – London +44(0)20.7086.4204 [email protected] Peter Hulyer Regional Managing Director, Marine – Asia +65.6239.7698 [email protected] Jeroen Kuyper Managing Director, Marine – Netherlands +31.10.448.7551 [email protected] William Lynch Business Leader, Marine Energy – London +44(0)20.7086.3965 [email protected] Risk. Reinsurance. Human Resources.