The marine insurance market is showing signs of improvement, according to the half-year results of two leading hull underwriters.
The positive figures at Beazley and the Lancashire Group follow the withdrawal of non-profitable marine underwriters from the Lloyd’s of London market and come in response to higher claims over the past year.
Beazley and Lancashire underwrite marine business in the Lloyd's and company markets.
Beyond expectations
Beazley said the rise in marine rates were a market response to higher claims and the Lloyd’s profit drive, under which more than 10 marine insurers have reduced business lines in the past year.
The results were beyond expectations, Beazely said, adding that it was now targeting the marine market for growth.
“The past nine months have seen a material change in sentiment in our market as heavy claims in numerous lines of business have driven prices higher.
"In September last year, our 2019 business plan envisaged rate rises well below what we have actually seen in the first half of the year,” Beazley said in its earnings statement.
The past nine months have seen a material change in sentiment in our market as heavy claims in numerous lines of business have driven prices higher. In September last year, our 2019 business plan envisaged rate rises well below what we have actually seen
Beazely
“We, accordingly, see opportunities for growth in lines of business such as marine and aviation, as well as property, where margins now look healthier than they have been for some years.”
Marine growth
In the year to June, Beazley's marine division earned premiums of $165m, up from $158m in the same period last year. It logged expenses of $145m, which included marine claims of $96.1m.
The bottom-line profit for marine was $4m, which contrasts with $3.2m in the first half of last year.
Underwriter Lancashire reported a similar result, with a 14.6% improvement in marine premiums in the first half of 2019, compared with the corresponding period last year.
Marine showed the strongest premium growth across all of its business lines. Lancashire said it was seeing higher rates as contracts were renewed.
“The increase in the marine segment was driven primarily by multi-year contracts renewing in the marine hull and marine P&I classes,” Lancashire said.
Lancashire earned $27.4m in marine premiums in the first half of 2019, compared with $23.9m in the first half of last year.
Lancashire Group chief executive Alex Maloney said that insurers are seeing the benefit of more disciplined underwriting and he expected to see further improvements.
“Looking ahead, the recent evidence of better market discipline and pricing will take time to feed through to our bottom line.
Gulf tensions
"However, I believe that we have the talent and capability to capitalise on the next stage of the insurance cycle, and our strategy has positioned us well to maximise the improving underwriting opportunity,” he said.
Shipowners could be faced with paying out even more for their marine insurance in the coming months as a result of Middle East Gulf tensions.
War risk rates in the region have already more than trebled, and underwriters are suggesting the political tension in the region could also push hull and machinery rates higher.
