Hull and machinery underwriters will continue to register losses unless rates rise further, an insurer warned the International Union of Marine Insurance (IUMI) conference.
IUMI’s Facts and Figures committee had earlier reported a 0.2% upturn in overall industry hull premium in 2019 which amounts to $6.9bn in total
Rama Chandran, who chairs the IUMI Ocean Hull Committee, described the upturn as “disappointing”.
“Price adequacy has been trending upward. but I thought it would be more than the 0.2% we saw from the Facts and Figures Committee yesterday,” he said on Wednesday.
Disappointment over the level of increases is likely mean underwriters will seek additional premium from shipowners at the next renewal.
The hull market has been reporting an annual technical underwriting loss every year since 2005 according to Chandran. He pointed out that current premium levels are only enough to cover the sector's attritional losses.
Chandran, who is also head of marine in Singapore at insurer QBE, indicated that further increases would be required if the hull and machinery sector is to be profitable again.
He said that the removal of capacity from the market which took place in 2018 has still not had the desired effect on rates.
'Long way to go'
“We still have a long way to go, the removal of capacity in 2018 has not moved the dial sufficiently,” Chandran said.
“In a low investment return environment we must question whether this is a sustainable position.”
As TradeWinds earlier reported, hull rates appear to be continuing to improve this year despite the negative impact of the coronavirus pandemic on the insurance markets.
Claims are also down in the sector but that is largely being attributed to the downturn in trade caused by the pandemic. The concern for insurers is that claims may pick up again as trade recovers.
Chandrand’s comments came at IUMI’s annual general meeting, which was scheduled to take place in Stockholm, but is being held online because of the current pandemic.
