The U.S. inland marine insurance segment experienced a “significant downturn in profitability” in 2020, with its loss ratio deteriorating by nearly 16 percentage points amid the COVID-19 pandemic, according to an AM Best report.
The Best’s Market Segment Report, “Significant Impact on Inland Marine Insurers’ Profitability from COVID-19,” notes that any result in the inland marine line, which consistently has outperformed the rest of the U.S. property/casualty industry, fell behind the broader industry in 2020.
The segment also saw its first decrease in direct premiums written in more than a decade in 2020. Premiums were down 2.6% from 2019. Still, the premium amount was greater than that seen in 2018, and is expected to pick up when economic activity returns to a normal level.
The report says the COVID-19 pandemic affected the segment in two key ways—through contingency losses on events and productions scheduled before the pandemic, as well as declines in new events and travel plans.
Inland marine insurance is composed of a very diverse group of coverages, including cargo, communications equipment (e.g., cell phones), event cancellation, fine art, personal watercraft and pet health insurance, among others.
Among the coverages, pet health insurance was a bright spot in 2020. It helped mitigate some of the segment’s premium decline. AM Best expects the pet health insurance market to continue growing and maintaining a relatively stable loss ratio.
Travel insurance (i.e., trip cancellation) also is a large segment of the inland marine line. The number of passengers traveling plummeted in March and April 2020. Despite some recovery, air travel through the second half of 2020 and into 2021 is still just over 40% of that during the same period in 2019. This drop led to loss payments on existing policies from canceled trips planned in advance of the pandemic, as well as fewer new trips, which depressed direct premiums written for travel insurance.
Overall, the decline in contingency covers (i.e., travel, film production) and the overall economic downturn’s impact on freight outweighed the increases in pet insurance and in construction spending. However, given the instability in contingency demand owing to the pandemic and the growth in consumers’ purchase of pet health insurance, AM Best said it expects further spreading of inland marine premium in the market.
Source: A.M. Best
*This story ran previously in our sister publication Insurance Journal.