After an inauspicious start, 2012 will be another difficult and uncertain year for the maritime industry faced with the aftermath of the Costa Concordia, further problems in the Euro zone, pirate attacks and increased sanctions, according to Willis Global Marine, part of Willis Group Holdings (NYSE: WSH), the global insurance broker.
The latest Willis Marine Market Review reveals the Hull market is in a state of flux following the Costa Concordia disaster in January. Some underwriters in the London insurance market, which will bear the majority of the estimated USD 500m hull claim, are adamantly refusing premium reductions or even flat renewals. However, unaffected underwriters in the Far East and Scandinavia are more open to negotiations.
Marine liability underwriters meanwhile are hoping the disaster drives through a general hardening of rates, with many seeking 5% increases going forward.
Cargo insurance buyers continue to enjoy the benefits of a soft market, achieving reductions in both premium and deductibles, as well as increases in limits, at little or no additional cost. Despite ever-dwindling returns to insurers, competition for business remains fierce with a flurry of new entrants creating excess capacity.Cargo underwriters are also feeling the impact of piracy, which continues to blight the shipping industry with no clear resolution in sight. The security measures taken by ship-owners are increasingly effective with less than 20% of attacks successful in 2011. However, this has only served to increase the demands and expectations of those attacks that do occur with total ransoms increasing 77% from 2010*. Alistair Rivers, CEO of Willis Global Marine said: “For many marine insurers the year began badly with the loss of the Costa Concordia cruise liner. It was a timely reminder that 100 years on from the loss of the Titanic, disasters on this scale are still possible despite all the industrial and technological advancements. But while this loss may have stiffened the hull market, the long term impact is questionable. The P&I and Liability aspects of this loss will be of far greater significance to insurers as matters evolve throughout the year.