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Global Marketplace Insights – Marine Q1 2024

Market Insights

April 16, 2024

Trevor McGarry, Head of Cargo & Specie, GB, discusses the current market conditions for the Marine industry.
Global Marine market trends

Hear from our experts and learn more about the latest insurance marketplace trends


Global Marketplace Insights – Marine Q1 2024

Global events in the past four years have had a major impact on the cargo market, with insurers and brokers alike in turmoil trying to address the multitude of problems faced by our clients caused by a global pandemic, severe supply chain disruption and the Russian-Ukraine crisis.

We were hoping that 2024 would offer a period of stability, allowing us all to step back and evaluate how the market can adapt to better serve the needs of insureds, given the change in the risk landscape over the past decade.

In fact, Q1 has proved to be even more challenging, with Houthi forces in Yemen escalating their attacks on vessels in the Gulf of Aden, piracy returning to Somalia, the hijacking of the MV Abdullah in March, and the Iranian seizure of the Saint Nicholas off the coast of Oman.

It should be noted that cargo insurance has a very distinct split between domestic markets who retain the majority of accounts locally, and the international markets which are predominantly focused on larger, more complex risks which due to their nature have high premiums but also high losses.

As a London writes such a large amount of international business, any change in the underwriting stance can impact markets throughout the world.

Whilst there was a short period of a gentle hardening in most domestic markets, things have now returned to normal with insurers seeking flat renewals and brokers pressing for reductions which are generally single digit.

Asia is definitely suffering with rate reductions increasingly becoming the norm, other than the case of capacity distress segments. The markets are in some instances agreeing to large double digit reductions when needed to retain business.

However, between 5% and 7.5% is generally achievable.

In China, insureds continue to rely on logistics providers to cover their losses but with high quality and high value cargo is now being exported insurance is becoming increasingly important.

In the Middle East and Latin America there was a heavy reliance on the purchase of facultative reinsurance to lay off loss making accounts, the availability of which dried up following Desultan and Lloyds, which in turn hardened local conditions.

With emerging hunger for premium, capacity is once again appearing, which we will anticipate will lead to a further softening in the domestic markets.

Strong domestic markets in Europe and Scandinavia continue to trade as usual with rates flat to single digit reductions.

Globally, there's been an inconsistent approach to cargos going through the Red Sea, mainly caused by the large majority of risks being containerized cargo were insured to not aware of whether these transits will be via the Red Sea or not.

Some insurers have cancelled war, stroke, SLCC in the Red Sea and have offered no reinstatement of cover.

Others have cancelled cover but reinstated at an additional premium.

And in many instances there has been no change.

For containerized cargo is placed in London, insurers have in the main, continue to provide cover at no additional premium.

However, for bulk shipments of oil and commodities, most insurers gave seven days notice but were willing to reinstate at an additional premium.

As with the Black Sea, London has actively been providing WAR and SLCC cover on the standalone basis for accounts where local insurers are unwilling to provide cover.

The premium generated by these two conflicts has been very significant, and there certainly been a factor in the results recently published. Following the sinking of the Ruby Marl and the number of vessels being hit by missiles increasing coverage still available.

However, insurers are keeping a close watch on the situation with pressure to reduce the notice period to 48 hours in case the situation escalates.

After five years of rate increases and restrictions in cover, the London market has returned to profit, with Lloyd's recently releasing their cargo results with a loss ratio of under 60%.

This has led to new capacity coming to the market through a mixture of new syndicates, MGAs and increasing trend for follow capacity.

In an effort to modernize the market and reduce acquisition costs, Lloyd set out a plan to move to a lead follow structure with Lead Syndicate setting the terms and follow Syndicates providing additional capacity.

Key Syndicate backed by Brit was launched in 2020 and became the first syndicate to use algorithms to underwrite a risk rather than people.

If a trigger market writes a risk, Key will provide following capacity with the layer line size being decided by their platform.

From the 1st of January this year, Key have partnered with Travelers and Aspen who will offer additional capacity via the Key platform for cargo risks.

We are aware that there are at least six other syndicates looking at launching their own algorithmic cargo platforms in Q3 of this year.

Other insurers are looking at alternative ways to increase the market share of what they view as a highly profitable class and at the same time they want to reduce the acquisition costs.

This is leading to the reemergence of side car capacity where insurers agreed to write a fixed share of a broker's entire marine portfolio on a full follow basis with no underwriting involvement on individual accounts.

Following Cecile 10, over 95% of brokers cargo facilities were not renewed as syndicates were effectively giving away the underwriting authority to the facility leaders and they could not justify the losses they were making to the management.

2024 has seen an explosion of new facilities and orders to the subscription market have been reduced substantially as brokers are transferring the business to these facilities which in turn means syndicates now have a hole in their budget which they are seeking to fill.

Falling commodity prices adding further to underwriter’s premium shortfall at a time when management are pressing for increased premium income given the profitable results.

Whilst the London market has softened with single digit reductions in Q1, taking into account the factors mentioned, we expect an acceleration of the downward trend during the rest of the year in London with domestic markets following in 2025 as competition with London increases.


Trevor McGarry
Head of Cargo & Specie, GB

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