Poll Of Marine Insurers Finds Optimism

NU Online News Service, Nov. 24, 11:24 a .m.EST?Ocean marine insurers expect that the full results for the yearwill show a continued profit, according to a recent survey.

David French, chairman, of the American Institute of MarineUnderwriters, said the poll also found marine insurers weremaintaining their pricing discipline.[@@]

Speaking at the annual meeting of the AIMU last Thursday in NewYork, Mr. French expressed some concerns about the economy anddeteriorating results in hull insurance, but the majority of hispresentation was upbeat.

Mr. French said the results of an informal survey of AIMU boardmembers found that most who responded to a questionnaire agreedthat this year's results would be at least as good, if not evenbetter than 2002. Almost all said that their expense ratiosimproved this year, he noted.

In 2004 respondents expected that the combined ratio for oceanmarine would rise a bit. Most of those polled said they believeresults in the hull and protection and indemnity lines wouldimprove, while cargo and yacht would remain the same.

The results for energy and offshore risks were deemed mostlikely to deteriorate, Mr. French observed.

Despite a decline in net written premium growth for ocean marinein 2002, French did not believe this indicated a turn in the marinemarket. "I think not. Anecdotal information suggests that pricingdiscipline has not yet been abandoned," he said.

French cited an Aon insurance market overview that suggests thatmarine markets are leveling off. The report said that "most U.S.marine markets will conclude 2003 with favorable combined ratios"and that management will continue to mandate increases to offsetpoor investment results, he noted.

AIMU said that its members continued to outperform the overallproperty-casualty business in 2002. "We turned the corner fasterthan the p-c business as a whole. And, of course, we did not sharein the catastrophic losses of 9/11," Mr. French said.

While the p-c combined ratio for 2002 was 107.2 percent, AIMUmembers posted a far more respectable 92.2 percent--a furtherimprovement from the nearly 99 percent combined ratio recorded in2001 and the market's lowest combined ratio in six years, Mr.French observed.

In other words, Mr. French said, ocean marine insurers attainedthat target return on equity of 12 percent that the p-c industry asa whole is still struggling to reach.

Mr. French noted several developments he said needed watching.Net written premiums for ocean marine insurers in 2002 rose just5.7 percent to nearly $1.3 billion, compared with a 12.3 percentincrease between 2001 and 2000, and 14 percent net written premiumgrowth for all p-c lines.

Mr. French said, "The sluggish economy in the U.S. and worldwideis likely a contributing factor to the modest increase in premiumsexperienced by marine underwriters last year. U.S. Gross DomesticProduct rose only 2.9 percent last year and is expected to riseonly 2.4 percent this year."

To a great extent, Mr. French said, the ocean marine industry'sperformance will follow the results of its two largest lines--cargoand yacht. In 2002, cargo recorded a remarkable combined ratio of75.4 percent, nine points lower than in 2001. In the yacht line thecombined ratio rose to 97.5 in 2002, up from 93.3 percent in2001.

The most dramatic deterioration in results was in ocean hull,which recorded a combined ratio of 132 percent in 2002, up from 113percent in 2001. These are the worst numbers since 1998, Mr. Frenchnoted.

At the same time, the most significant improvement occurred inoffshore risks, which saw a combined ratio of 93.3 percent in 2002,down almost 60 points from the nearly 153 combined in 2001.

Given the state of the U.S. economy and the dynamic insurancemarketplace, Mr. French said it was hard to recall a morechallenging time than the one the overall p-c industry and marineinsurers confront today.

Mr. French said AIMU can help marine underwriters succeed intheir highly competitive industry by equipping them with knowledgeand information.

In addition to monitoring significant changes in regulation andlegislation such as the maritime security bill, AIMU providesdirect services in support of its members. "AIMU staff andcommittees work diligently with a variety of constituencies inclassification societies, law enforcement, government andinternational marine and trade organizations," said Mr. French.

AIMU also maintains an international intelligence network ofcorrespondents in port cities throughout the world who also arrangesurveys of damages to identify the cause and value of losses andhelp speed claim settlements.