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Risk. Reinsurance. Human Resources.
Marine Insurance Market ReportSummary and ForecastQ3’15
Aon Risk SolutionsAon Broking | Marine
Aon Risk Solutions Marine Insurance Market Report | Q3’15 2
Market Trends as of Q3 2015We 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.
Aon Risk Solutions Marine Insurance Market Report | Q3’15 3
HullAbundant 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.
Aon Risk Solutions Marine Insurance Market Report | Q3’15 4
P&IThe 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 P&I 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 P&I in Asia.
Brown Water and Hull and Marine LiabilityCapacity 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.
Aon Risk Solutions Marine Insurance Market Report | Q3’15 5
CargoWhile 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.
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)
Aon Risk Solutions Marine Insurance Market Report | Q3’15 7
Overall OutlookThe 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 GlanceAon 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.
ContactsSteve BeslityChairman – Global Marine
+1.212.441.1755
Brent ChorneyMarine Practice Leader – Canada
+1.416.868.5795
Heather ClarksonHead of Hull – London
+44(0)20.7086.3908
Robert DeMottaMarine Practice Leader – U.S.
+1.212.441.1085
Alexander GibsonHead of Marine – London
+44(0)20.7086.4204
Peter HulyerRegional Managing Director, Marine – Asia
+65.6239.7698
Jeroen KuyperManaging Director, Marine – Netherlands
+31.10.448.7551
William LynchBusiness Leader, Marine & Energy – London
+44(0)20.7086.3965
Risk. Reinsurance. Human Resources.