While marine insurers remain well-capitalized, the line faces many risks. A protracted soft market has eroded margins, large losses have put pressure on rate adequacy, and marine cat experience has been highly correlated with that of property—all of which highlight multiline accumulations, an area of increasing concern. And yet, the marine industry has not fully embraced the robust catastrophe analytics adopted by property insurers.
Executive SummaryLarge marine catastrophe losses, increasing accumulations of cargo exposure and a continued soft market have put insurers and reinsurers under pressure to better understand marine risk. RMS Director Chris Folkman offers a perspective on the unique risk management problems facing the marine industry and how new marine catastrophe models can provide deeper insight into the loss potential.
Marine is a uniquely challenging line of business to model. Unlike houses and buildings, marine cargo is mobile, and its vulnerability differs widely depending on the product, packaging and storage. Exacerbating the challenge is the accumulation of cargo in ports and storage facilities. As shipping vessels have grown larger, storage facilities busier and terminal operations more efficient, port values have grown to staggering levels. Today, the world’s largest ports process more than 30 million TEUs (20-foot equivalent units) of cargo annually. If laid end-to-end, the containers would circle the world five times. Much of this cargo is stored at sea level, on open lots or inside warehouses, plainly exposed to wind, surge and earthquake perils.