By Mervyn Naidoo. Head: Marine at Old Mutual Insure
What are the latest trends in marine risks?
Global insurance associations from Europe, Asia/Pacific, Latin America, North America, and Other Regions (Africa included in Other) reported premium data to the Facts & Figures Committee of the International Union of Marine Insurance (IUMI) at the annual IUMI Conference held in September of this year in Edinburgh.
The Global data from IUMI 2023 and the South African Marine Insurance premium from the Association of Marine Underwriters of South Africa (AMUSA) reported the percentages of the four lines of business that made up the marine insurance sector in the 2022 year as follows:
- Transport/Cargo Insurance: 57.3% (Global) and 89.5% (SA)
- Global Hull Insurance: 23.4% (Global) and 9.1% (SA)
- Marine Liability Insurance: 7.7% (Global) and 1.4% (SA)
- Offshore Energy Insurance: 11.5% (Global) and 0% (SA)
IUMI 2023 also reported various challenges faced by the global market and the common challenges that local insurers faced for 2022 and 2023, are an increase in severe weather conditions (wind/wave force, floods) leading to increased risk of large event losses (Natural and Man-made Catastrophes), and Geopolitical tensions.
The 2022 KZN Storms and Geopolitical tensions in the form of the Russia/Ukraine War impacted the local 2023 treaty renewals, resulting in increases in renewal premiums, reduction in retentions or limits and introduction of additional exclusions to insurers.
What are the most prominent covers clients are looking for?
The South African marine insurance market is dominated by Transport/Cargo Insurance (Cargo) as it makes up 90% of marine insurance business written in South Africa. This product is increasingly impacted by severe weather conditions as well as Geopolitical tensions, both of which had been relatively low risks for our market prior to 2022. In addition to these risks, insurable interest and contracting have a critical impact to all participants in the marine insurance chain.
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It is vital that insurance partners in the international and local cargo supply chains understand the numerous contracts that exist between each party to determine insurable interest and contract rights. This is a risk that the legal fraternity is increasingly raising as a concern. The contracts start with the terms of sale (Incoterms) between the seller and buyer, continue with the contracted or standard terms and conditions of the transporter and international carriage contracts or freight forwarding contracts in the shipping, clearing and freight agents’ area of control that stipulate the rights and responsibilities of each party.
The various parties in the cargo supply chain will require some form of marine insurance to cover the risks to the cargo for material damage or loss on a ‘All Risks’ or ‘Restricted’ conditions basis or contracted liability or limited liability in terms of a logistics partners risk and responsibility.
What are the challenges that brokers face?
A major challenge is the shortage of experienced insurance broking professionals in the general insurance space, which the marine line of business is not immune to. Brokers with sound marine insurance experience is dwindling due to an aging work force and local tertiary education for this insurance product is limited, which impacts the new entrants in this line of business. There is evidence that clients also do not have suitably qualified personnel to manage their marine insurance needs, and this has been seen when the assured does not understand where or when they have insurable interest in the cargo.
Where should brokers look for assistance?
The South African Chamber of Commerce can assist with understanding the Inco-terms and marine lawyers at law firms with experience can be appointed to obtain legal advice when contracting.
With CAT events increasing, in-house risk engineering divisions and tools are among the value-added services provided by some insurers offering additional engagement and risk management at the right time in a policy’s life span.
Insurers, brokers, and clients must partner with one another to understand the exposures that are impacting all parties in a marine insurance contract to find resolutions that benefit all stakeholders in the value chain.