The theme last year’s International Union of Marine Insurance conference, “Charting the Course through Economic Uncertainty,” certainly was on target. Marine insurers from around the world were told that these uncertainties include a spotty and sluggish U.S. and global economy, a sovereign debt crisis here and in Europe and low interest rates.
Executive SummaryMarine insurers' fortunes are entwined with world trade activity, but their challenges scale beyond the fate of the global economy, according to One Beacon's Robert Gallagher, who reviews emerging risks from stock throughput offerings, wind turbine transport and a Panama Canal expansion project.
One thing is certain: the fortunes of marine insurers are inextricably linked to the performance of the global economy and world trade. A flattening of world trade produces little exposure growth. In other words, there is little uptick in the number of ships we insure and the value of their cargoes.
We also know that we will be operating in a low interest rate environment for the foreseeable future. And that has a direct impact on marine insurers. Simply put, low interest rates mean that marine insurers must place a greater reliance on underwriting success to produce profits. The sins of poor underwriting can be hidden no longer.