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Marine Cargo Insurance

Cargo insurance still in choppy waters

Current issues such as the war in Ukraine, disrupted supply chains caused by the pandemic in general and ongoing lockdowns in China in particular are preoccupying the minds of marine insurers and businesses seeking insurance alike. As a result of these developments, however, new challenges have emerged. While insurers are looking to provide less coverage, customers are seeing a significant increase in their insurance needs whilst expecting innovative solutions at competitive rates.

Market situation

Market increasingly being challenged by unanticipated events

Insurers’ restructuring measures seem to be having an effect: following a loss ratio of 67 per cent in 2020, GDV has reported a loss ratio of 65 per cent for the previous calendar year (2021), with premium income falling by 2.6 per cent to EUR 756m in the same period.

Nevertheless, logistics flows continued to be subject to COVID-related delays and disruptions in 2021, which, in turn, have had a sustained impact on premiums and claims. On top of this, the impact of the war in Ukraine on customers’ sales figures in 2022 is still an unknown. Such unforeseeable effects are becoming increasingly commonplace, making a simple assessment of past developments and a numbers-based view of the future equally difficult.

Premium vs. claims experience

2013 to 2021

Source: GDV

Outlook

The outlook remains negative, with no sign of a change in sight. While premium increases were top of insurers’ agendas in the years before 2021, a trend towards often significant drops in coverage is now becoming apparent. Cyber, blackout and pandemic clauses, for example, are being introduced market-wide, with political risks partially excluded from coverage.

In addition, not only are sanction tests being tightened, they are also being made a necessary condition of insurance confirmations for purchase contracts. In addition, geographical exclusions are also being sought. In view of the current situation, this could mean drastic consequences for customers if shipments to, from and in particular through Russia (the buzzword here is “New Silk Road”) were no longer insured in future. Negotiations with insurers on this issue are becoming increasingly contentious.

The desire by insurers to be given detailed information about aspects such as customers and sales flows in order to be able to restrict insurance cover as a consequence represents a further challenge over the coming months.

Market trends

Premiums affected by controversial development

The appetite for risk among insurers is waning while the number of risks no longer underwritten by them continues to grow. Whereas, previously, industries were put on the “no underwriting list” because of their product types or claims propensity, increasing scrutiny is being devoted to where and to whom customers ship. Policy holders demanding significantly higher insurance amounts as a result of inflation or pandemics should be prepared for much higher premiums.

Tax audits are also increasingly focussing on whether tax-exempt premiums have been calculated correctly, leading to policy adjustments to policies and invoices. As a result, tax amounts disclosed in insurance tax statements might increase, albeit slightly.