If there is one thing that first needs to be understood aboutthe Inland Marine marketplace, it is this: Capacity is not anissue.

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 andseasoned carriers trying to hold on to market share, rates havecontinued to contract.

Related: It's a buyer's market for InlandMarine

“You definitely see pressure on pricing. You have to fight toretain your good accounts,” says Dan Folkes, Nationwide's assistant vice president of InlandMarine and specialty property underwriting. “We do try to getprice increases on the ones that we feel deserve it, with mixedresults.”

The most common Inland Marine classes, including builders' risk,contractors' equipment and installation floaters, continue to seethe strongest competition. More specialized Inland Marine classesof business, such as warehousemen's legal liability, have seen lessrate contraction and competition because of carriers' need tounderstand the liability exposure and additional legal expensesoutside of the damage to physical property.

More business to chase

Consistent profitability may seem counterintuitive given thedownward pricing trend, but Folkes attributes carriers' profit torates finally coming in line with where they should be. “Pricingwent up significantly after the frame fire losses we saw a fewyears ago,” he notes. “With the reduction in those losses andbetter underwriting, pricing has dropped significantly.”

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

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

Industry observers are eagerly watching the construction sectorin the wake of the presidential election and its unexpected outcome. “A hugefactor that could come into play in the market involves whether ornot we see Trump's promise of increased infrastructure spending befulfilled,” adds Chris Giadrosich, associate vice president andInland Marine manager for Colony Specialty. “Builders' risk could potentiallygrow even more.”

Evolution of a line

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

That capacity continues to find profitable results. Although anumber of large frame fires rocked the builders' risk marketseveral years ago, today it's smooth sailing across the InlandMarine marketplace.

“Contractors' equipment continues to have a little morepotential for loss not just due to its inherent mobility, but alsodue to the increased use and exposure to theft that iscoming from the uptick in construction activity. However, theclaims we are seeing are certainly nothing beyond what we wouldexpect with the line,” says Giadrosich.

Although the cargo segment of Inland Marine remainsfavorable to buyers, Bergen is watching carefully for anybuyer-adverse developments in the line. “In just the past fewmonths, we have seen insurers who specialize in MTC [Motor TruckCargo] and the related APD [Auto Physical Damage] for commoncarriers taking a more conservative approach to pricing and terms,”she says.

“Some domestic carriers have even restricted new businesswritings of APD until their book performance improves,” Bergenadds. “Those carriers that do have the ability to package the MTCand APD are at a competitive advantage in this aggressive market,and may have a better chance with adjustments to poor performingrisks.”

Changes in transportation

Underwriters also have their eyes on other changes intransportation that may impact the Inland Marine market. “We seeconsolidation among transportation companies, meaning that thereare fewer companies for cargo writers to target. We also see anevolution of transportation into new areas of business, becomingmore logistics-oriented,” says Opitz. “In the past, it was easy toseparate motor carriers from warehouse operators and freightforwarders and brokers. Those lines are getting more blurred.”

Carriers writing motor truck cargo and contingent cargo (whichprotects against the cargo owner's inability to collect from atrucker's insurer) also need to address the new FDA rule onSanitary Transportation of Human and Animal Food. This rule appliesto the practices of shippers, loaders, carriers by motor or railvehicle, and receivers involved in the transportation of food to beconsumed or distributed in the U.S. It is meant to preventpractices during transportation that create food safety risks, suchas failure to properly refrigerate food, inadequate cleaning ofvehicles between loads, and failure to properly protectfoodstuffs.

Broader contractual liabilities of motor carriers

“With broader contractual liabilities of the motor carrier andthe new responsibilities under the rule, it is possible to deem thecargo adulterated, and the motor carrier liable for loss, when nophysical loss or damage is certain,” Bergen says, adding thatinsurance carriers are just beginning to explore differentapproaches to addressing this increased exposure to their motortruck cargo legal liability forms.

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

“To the extent that the transportation industry is almost alwaysunder some sort of change, whether it's regulation, industrypractices, or competitive forces in their own space, it forcesinsurance to have to respond. Insurers need to keep up to date withdevelopments,” adds Opitz.

Producer opportunity

Capitalizing on opportunity in the marketplace starts witheducation. “Because of the many forms andendorsements that are out there, Inland Marine can be viewed as ana la carte [coverage] where you can really customize what you puttogether for a client,” Giadrosich says. “However, putting togetherthat 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 thetime to be informed.”

“I would encourage any retail agent who is looking to specializein 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 exceptionalresource that provides detailed information about individual motorcarriers, financial stability ratings, violation and inspectionreports, commodities hauled, and additional information that canaffect the insurance offerings for a specific insured. Having aknowledge base on how insurance carriers take this information intoaccount when underwriting trucking operations can be key toinstructing and educating an individual insured regarding theiroptions for insurance.”

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

“Developing a good understanding of how Inland Marine works canprovide an agent a selling advantage by enhancing how they look toa client and providing some flexibility and creativity within theirinsurance 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'tget the full attention of agents. A wise agent should spend sometime getting better acquainted with the underwriting and sales ofit.”