Gallagher has warned shipowners that marine hull and machinery rates will continue to harden across the main global markets.
The marine insurance broker's comments indicate that shipowners will be paying more for cover as they renegotiate contracts in the key hull and machinery renewal month of July.
Gallagher said that the rise in rates, which was first prompted two years ago by a profit drive at the Lloyd’s of London market, is now impacting insurance rates across the world.
“Where the London market was generally the first to come under pressure for rate increases in the second half of 2018 and throughout 2019, it seems most insurers around the world are now pushing for rises,” Gallagher said in its State of the Market report.
"Many insurers are being urged to write less premium more profitably and argue that even after successive increases, the majority of fleets are still priced at levels well below what is considered to be technically adequate.”
The broker said that underwriters are increasingly showing they are prepared to “let business go” rather than renew at potential loss making rates.
Gallagher also pointed out that large losses related to the coronavirus pandemic, suffered by the wider general insurance market, are likely to also increase pressure on the specialised marine market to increase premiums.
Market exits
A growing number of hull and machinery underwriters have left the market because of poor returns over the past two years. Gallagher said that there are no indications that the improving rates are tempting capacity to return to the market.
The broker pointed out that the only new entrant to the market is the North P&I Club, the UK-based protection and indemnity insurer, which has started a new hull facility called North Hull.
Gallagher predicted the hull and machinery market should come out of the coronavirus pandemic relatively unscathed by claims, as it only covers physical damage to a ship.
However, there could be some for hefty claims in store for marine delay insurance cover providers as the result of the pandemic.
Tighter customs and immigration regulation has caused widespread disruption to ship schedules.
Another concern for Gallagher is the increasing incidents of piracy off the coast of East Africa and the Gulf of Guinea. The broker said the attacks are a “stark reminder that the threat still remains high”.
