If there is one thing that first needs to be understood about the Inland Marine marketplace, it is this: Capacity is not an issue.

Inland Marine is traditionally separated into two segments — property under construction and contractors' equipment, and property and cargo on the move. In the former, because of the continued capacity entering the marketplace and seasoned carriers trying to hold on to market share, rates have continued to contract.

“You definitely see pressure on pricing. You have to fight to retain your good accounts,” says Dan Folkes, Nationwide's assistant vice president of Inland Marine and specialty property underwriting. “We do try to get price increases on the ones that we feel deserve it, with mixed results.”

The most common Inland Marine classes, including builders' risk, contractors' equipment and installation floaters, continue to see the strongest competition. More specialized Inland Marine classes of business, such as warehousemen's legal liability, have seen less rate contraction and competition because of carriers' need to understand the liability exposure and additional legal expenses outside of the damage to physical property.

More business to chase

Consistent profitability may seem counterintuitive given the downward pricing trend, but Folkes attributes carriers' profit to rates finally coming in line with where they should be. “Pricing went up significantly after the frame fire losses we saw a few years ago,” he notes. “With the reduction in those losses and better underwriting, pricing has dropped significantly.”

One bright spot for price-pressured insurers is that, while more carriers are chasing business, there is more business to chase. “We continue to see increased construction activity and spending, leading to greater business flow,” says Bob Opitz, North American Inland Marine manager at Chubb.

The continued spending on construction is affecting the transportation side as well. “Goods have to get to the job site,” Opitz says. “Some of the new projects we are seeing are also infrastructure-oriented (tunnels and bridges), which has an impact on transportation.”

Industry observers are eagerly watching the construction sector in the wake of the presidential election and its unexpected outcome. “A huge factor that could come into play in the market involves whether or not we see Trump's promise of increased infrastructure spending be fulfilled,” adds Chris Giadrosich, associate vice president and Inland Marine manager for Colony Specialty. “Builders' risk could potentially grow even more.”

Evolution of a line

Chelsea Bergen, area assistant vice president, Risk Placement Services, in the past few years has seen many Inland Marine divisions forged as carriers try to diversify their book and capture exposures that are unique to Inland Marine placements. The market has likewise seen quite a bit of international interest in acquiring U.S. domestic carriers as they, too, try to broaden their book of business. Many of those acquisitions have included carriers possessing a strong Inland Marine presence.

That capacity continues to find profitable results. Although a number of large frame fires rocked the builders' risk market several years ago, today it's smooth sailing across the Inland Marine marketplace.

“Contractors' equipment continues to have a little more potential for loss not just due to its inherent mobility, but also due to the increased use and exposure to theft that is coming from the uptick in construction activity. However, the claims we are seeing are certainly nothing beyond what we would expect with the line,” says Giadrosich.

Although the cargo segment of Inland Marine remains favorable to buyers, Bergen is watching carefully for any buyer-adverse developments in the line. “In just the past few months, we have seen insurers who specialize in MTC [Motor Truck Cargo] and the related APD [Auto Physical Damage] for common carriers taking a more conservative approach to pricing and terms,” she says.

“Some domestic carriers have even restricted new business writings of APD until their book performance improves,” Bergen adds. “Those carriers that do have the ability to package the MTC and APD are at a competitive advantage in this aggressive market, and may have a better chance with adjustments to poor performing risks.”

Changes in transportation

Underwriters also have their eyes on other changes in transportation that may impact the Inland Marine market. “We see consolidation among transportation companies, meaning that there are fewer companies for cargo writers to target. We also see an evolution of transportation into new areas of business, becoming more logistics-oriented,” says Opitz. “In the past, it was easy to separate motor carriers from warehouse operators and freight forwarders and brokers. Those lines are getting more blurred.”

Carriers writing motor truck cargo and contingent cargo (which protects against the cargo owner's inability to collect from a trucker's insurer) also need to address the new FDA rule on Sanitary Transportation of Human and Animal Food. This rule applies to the practices of shippers, loaders, carriers by motor or rail vehicle, and receivers involved in the transportation of food to be consumed or distributed in the U.S. It is meant to prevent practices during transportation that create food safety risks, such as failure to properly refrigerate food, inadequate cleaning of vehicles between loads, and failure to properly protect foodstuffs.

Broader contractual liabilities of motor carriers

“With broader contractual liabilities of the motor carrier and the new responsibilities under the rule, it is possible to deem the cargo adulterated, and the motor carrier liable for loss, when no physical loss or damage is certain,” Bergen says, adding that insurance carriers are just beginning to explore different approaches to addressing this increased exposure to their motor truck cargo legal liability forms.

“It's important for agents, brokers, and insureds to become educated on the requirements they must comply with and understand how their coverage forms will respond in the event of such a loss,” says Bergen. “From the insurance-carrier perspective, the increased requirements of their clients are expected to lead to elevated claims frequency. From the motor carrier perspective, the new requirements, including training, record keeping, and monitoring, will increase the cost of doing business.”

“To the extent that the transportation industry is almost always under some sort of change, whether it's regulation, industry practices, or competitive forces in their own space, it forces insurance to have to respond. Insurers need to keep up to date with developments,” adds Opitz.

Producer opportunity

Capitalizing on opportunity in the marketplace starts with education. “Because of the many forms and endorsements that are out there, Inland Marine can be viewed as an a la carte [coverage] where you can really customize what you put together for a client,” Giadrosich says. “However, putting together that program requires education and specialization on the brokers' side to know what they are selling. In addition to our resources, IRMI, AAIS, and ISO all have great resources for agents. Take the time to be informed.”

“I would encourage any retail agent who is looking to specialize in Inland Marine to review upcoming events by the Inland Marine Underwriters Association,” says Bergen. “Specific to the trucking industry, the Central Analysis Bureau is an exceptional resource that provides detailed information about individual motor carriers, financial stability ratings, violation and inspection reports, commodities hauled, and additional information that can affect the insurance offerings for a specific insured. Having a knowledge base on how insurance carriers take this information into account when underwriting trucking operations can be key to instructing and educating an individual insured regarding their options for insurance.”

Wholesale brokers can also provide expertise when a class of business is not within the area of specialization of the retail agent, while allowing the retail agent to provide a comprehensive insurance program for their client. In addition, wholesale brokers often have access to markets that are not available to the retail community directly, which can assist agents and their clients that have more complex risk characteristics.

“Developing a good understanding of how Inland Marine works can provide an agent a selling advantage by enhancing how they look to a client and providing some flexibility and creativity within their insurance program,” Folkes says.

“Inland Marine is somewhat of a 'forgotten' line,” he adds. “It's not as big in premium as other lines and sometimes doesn't get the full attention of agents. A wise agent should spend some time getting better acquainted with the underwriting and sales of it.”

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Keep on keepin&rsquo; on: Inland marine market update

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