Slow economic growth, low inflation and minimal interest rates pose special challenges to ocean marine underwriters–fewer ships to insure and less goods in transit to insure, with reduced value of merchandise and lower exposures, according to the chair of the American Institute of Marine Underwriters.
Speaking at the organization's annual meeting earlier this month in New York City, AIMU Chair Dennis C. Marvin observed that reduced exposures and values mean flat or falling premium volume for most marine segments.
Combined with more than sufficient capacity, the budget constraints of buyers and shrinking profit margins, these factors are likely to lead to a continuing soft market in 2010, he said.
"Now, more than ever, the most successful marine underwriters are the most diligent, knowledgeable and focused on the risks they assume," said Mr. Marvin, who is vice president, ocean marine at Max Specialty.
Looking at other issues affecting marine underwriters, Mr. Marvin expressed concern at the increase in restrictive trade practices, citing a report from Global Trade Alert which found governments have planned 130 protectionist measures, affecting 90 percent of the goods traded in the world.
"U.S. marine underwriters have historically supported free trade and must vigorously oppose resurgent efforts to impede it," he said.
Mr. Marvin reported that AIMU has been actively working with federal and local law enforcement task forces combating cargo theft. He noted that AIMU continues to press federal authorities to vigorously combat the problem, whose cost is estimated at between $25 billion and $30 billion annually–with high-tech and pharmaceuticals among the high-value targets.
Mr. Marvin said the United States, along with 20 other nations, signed the Rotterdam Rules which were prepared by a Drafting Group of the United Nations Commission on International Trade Law.
AIMU supports the new rules, which address a lack of uniformity in the governing liability of the international carriage of goods.
Commenting on the increase in piracy, Mr. Marvin observed that incidents continued to rise during the first nine months of 2009, with the Gulf of Aden and the coast of Somalia top areas of concern.
He noted a host of initiatives being undertaken to counter the threat, such as a combined international military task force and extradition agreements.
Mr. Marvin also said a consortium of industry associations have produced a compilation of best practices–guidelines which stress that superior planning and training by a ship's crew can significantly reduce the risk of hijacking.
He explained that piracy policies generally cover the ships against loss or damage, while the crew is covered for kidnap and ransom. Some may also include the daily loss from a ship being detained while the owners negotiate ransom.
The idea that insurance coverage may act as an incentive for a ship owner to pay ransom is the cause of some controversy, according to Mr. Marvin.
"Certainly the principle of General Average"–a legal principle of maritime law under which all parties in a sea venture proportionally share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole in an emergency–"will continue to be tested with some jurisdictions refusing to pay on that basis," he said.
"There are also those that believe the payment of ransom to pirates violates the U.S. principle of not negotiating with terrorists," he added. "It appears that the courts may decide a lot of the issues at the end of the day."
Mr. Marvin commended the work of AIMU's committees and educational programs for their contributions to the marketplace. He characterized AIMU as a collegial community, "dedicated to fostering the highest standards of professionalism; stimulating creativity and innovation; and enhancing the industry's commitment to service through skill, dedication and knowledge."
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