During 2022, direct written premiums in the U.S. inland marine sector increased 14.3% compared with the year prior, while the sector's loss ratio fell from 49.3 in 2021 and 46.6 in 2022. Credit: sirisakboakaew/Adobe Stock

Built on the back of marine cargo coverage, inland marine insurance has evolved into a line of coverages that address a broad range of risks in an even broader array of industries. "In the past, I've been asked by management and others what SIC code (standard industrial classification) inland marine applies to and my response has always been 'all of them,'" Rich Soja, head of global inland marine for Allianz Global Corporate & Specialty, says. "There is a little bit of inland marine in every sector and industry. With that said, the two most obvious ones are construction and transportation logistics." Recent booms in building and logistics have helped drive growth for the inland-market insurance market. During 2022, direct premiums written in the U.S. inland-marine sector increased 14.3% compared with the year prior, AM Best reported. In addition to collecting more premiums, the sector has been enjoying an improving loss ratio, which fell from 63.8 in 2020 to 49.3 in 2021 and 46.6 in 2022. Josh Jennings, senior vice president, head of inland marine at Aspen Insurance Holdings, says that while any property that could be mobile or is not permanently kept at one fixed location needs inland marine coverage, the company's biggest demand in recent years has come from the construction sector. In addition to covering all of a project's building materials during shipping and storage on site, a contractor's tools, which are often mobile and can be high-value items, are also covered. With so many moving pieces to consider, Jennings says the underwriting process can be lengthy. |

Insuring to value

Making sure coverage accurately reflects the value of the property is vital to making sure the coverage is perfectly suited to the risk, notes Tony Falcone, north region president, inland marine, for Intact Insurance Specialty Solutions. The need to set an accurate value is even more pressing in today's inflationary environment. "The reality is a claim today is a lot more expensive than it was 10 years ago or five years ago," says Falcone, who also serves as chair of the Inland Marine Underwriters Association. "If we're not starting with a reasonably accurate value for a piece of contractor's equipment, then we are not getting enough money for the exposure." Jennings notes the sector has been able to dull the blows from inflation better than other property lines, as evidenced by the line's recent loss ratios. He explains that Aspen limited inflation's impact by educating policyholders and brokers on the importance of accurate values. "After a few years of having some very candid conversations take place early in the underwriting process, I feel that insureds and brokers today better understand that risk and how to address it," Jennings says. "At the end of the day, it's about making sure the insureds are covered adequately in case of a loss, and I think all the parties involved understand that to be beneficial." Part of making sure coverage is adequate is addressing the "constantly changing nature of the same exposure," says Allianz's Soja. "The status of the exposure when it first starts may be just the four walls and roof covering. But as the construction project progresses the insured could introduce production machinery, which could have exposures that require specialized insurance," he says, adding that a skilled inland marine underwriter can tailor individual project-specific coverage to address these needs. "There was a time where the concern was values just kept going up, up, up, and of course, the concern there is under insurance. But that's not necessarily the case anymore, depending upon the timing of when the insurance contract was initiated," Soja tells PropertyCasualty360.com. For example, the cost of lumber could have been skyrocketing when the contract was signed. But two years later the costs could be a fraction of what it was," he says, adding: "It does go both ways, and that's one of the more challenging areas to address." The slideshow that follows reviews the 10 largest U.S. inland marine carriers based on 2022 direct premiums written, according to AM Best:   According to Melinda Langworthy, senior account executive with Leif Assurance, it is critical to do a deep dive into the project at hand with a comprehensive risk assessment. "If somebody calls me and they're looking for inland marine coverage, I'm going to work to understand what they're doing and what the ask is to make sure that they're properly covered," Langworthy says. For example, she says that an insured might be asking for inland marine coverage when what they really need is a lease-rented policy because they are renting a large piece of equipment. In the end, she says it is about pinpointing the policyholder's greatest exposures and tailoring a policy around them. |

From sea port to loading dock

According to Ben Tuttle, senior vice president of inland marine insurance at Tokio Marine America, construction, such as builder's risks and contractor's equipment, accounts for around 40% of the inland market. Inland marine floaters, which can cover property ranging from fine art and jewelry to medical equipment, account for 20%-30% of the inland market, Tuttle says, adding that floaters are typically unusual lines that are "not normally covered under a package." Coverage from freight being moved from ocean-going vessels to land-based modes of transport is where inland marine got its start and the logistics sector still comprises roughly 40% of the inland market's business comes from clients in the transpiration sector, Tuttle says. In addition to consolidation and other economic factors creating challenges in the trucking industry, regulations such as California's Assembly Bill 5 (AB 5) are making it more difficult to write coverage for motor carriers, Tuttle says. AB 5 declares that owner-operator drivers are either employees of a larger trucking company and can be covered by that company's insurance, or the drivers are truly independent contractors and must secure coverage on their own. "So they (agents and brokers) have to find coverage for auto physical damage, auto liability, general liability, motor truck cargo and all that for a single trucker," Tuttle says. He explains the market isn't exactly enamored with this single-truck approach since it takes as long to manage that one trucker's needs as it would to write coverage for a 10-unit trucking firm. In addition to the time, Tuttle says the economics of writing a single trucker is a challenge. For example, auto liability on a single heavy unit truck is often around $1 million, he says "All it takes is one accident and you are blowing through that limit. Especially in today's world of nuclear verdicts," he says. "Any loss is going to blow out any premium you're going to make." While the situation might seem dire for those small trucking companies and true sole proprieties, Tuttle says a number of insurtechs and MGAs are working to build programs and leverage digital tools to help these freight movers secure the coverages they need. |

When disasters strike

gNatural catastrophes are another challenge affecting inland marine policyholders across industries, Jennings points out, explaining that moving forward inland marine carriers will be pricing for specific perils and further restricting coverage around extreme weather events. "The losses that arise from these significant weather events, and also the increase in severity, is not going to go away. Taking the time to understand our insureds' diverse and nationwide business models is key. The balance of managing our own risk while meeting the complexities of our clients continues to evolve through communication," he says. To best prepare for the unknown nature of extreme weather events, Jennings said underwriters should be looking at how well companies are preparing for potential extreme weather and how proactively they respond when those situations arise. "That allows underwriters to take those plans into consideration and provide terms and pricing based on merit," Jennings says. In addition to policyholders being prepared for extreme weather, underwriters also want to foresee potential disasters so they can price policy accordingly. To achieve these goals, mapping and flood risk assessment tools have long been a go-to source for information. However, as the climate shifts, there is a growing concern that these tools might be inadequate to gauge what the future might actually hold, Falcone says. |

Tech gut check

Speaking more broadly about the use of predictive models and artificial intelligence to better assess risks, Falcone tells PropertyCasualty360.com that he hopes the income wave of technology gets underwriters to "challenge their gut." "I hope it gets people like me, who have been doing this for decades, to really question and challenge the way it has always been done," he says. "I might think X amount of premium is adequate per power unit in trucking, but maybe it isn't. The introduction of data enables us to question our gut." Sharing a similar sentiment, Allianz's Soja explains that the time has come for inland marine departments to leverage data analytics to evolve to provide solutions that are more comprehensive for policyholders as well as agents and brokers. "Strictly monoline solutions to narrow exposure needs are great. They have gotten us to the good results we see today," Soja says. "Darwinian theory, if you will, will require those truly committed to the entire inland marine space to take the core skillset that we have and be a little more dynamic to better serve the evolving needs of the customers." Additionally, he says technology for loss improvements such as temperature monitors and shock sensors on sensitive cargo are some practical, effective technology usages deployed right now. The current use cases are very specific circumstances and the ability to scale these technologies across an entire book of business is a challenge, according to Soja, who adds: "Our ability to scale that data to impact our entire portfolio is something we're working on diligently." Falcone agrees, noting that we are just seeing the tip of the iceberg in terms of how technology will transform the inland marine sector. "Speaking from experience, 10 years ago these devices and the Internet of Things were not even things we thought about," he says. "But now we are able to write larger, more complex risks because we can install these types of devices." He gives for example water detection systems that can alert property owners, job site supervisors and other stakeholders of a leak or a change in temperature. "We have proven that we can prevent losses by using these devices and they have enabled us to expand our appetite and take on bigger risks," Falcone says. "We are just scratching the surface on what's available and what we can do with these tools." Leif Assurance has an interesting view of the ways technology is affecting inland marine and equipment risks thanks to its corporate structure with Powers Insurance and Risk Management. Powers has long worked with EquipmentShare, an equipment sales and rental company that leverages the cloud, GPS and other technology to help contractors track and manage their fleets. During Hurricane Harvey, EquipmentShare was able to use GPS monitoring and its T3 telematics platform to relocate its equipment, Langworthy says. Thanks to the technology, no equipment in the rental yard and none of the machinery on loan incurred damage during the storm. "Because of the GPS tracking, data and T3, they were able to get alerts on every single piece of equipment and know when to get them out of there," she says. "That also means we are able to add flood, wind and hail back into our coverages because we can leverage the technology." Related: |

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