NU Online News Service, March 9, 3:25 p.m. EST
Buyers of marine insurance are likely to see a continuing softening of insurance rates in 2011, provided they can show they are a good risk, according to a report released by insurance broker Marsh.
In the firm's latest Marine Market Monitor report, research also shows that marine insurance rates fell in 2010, driven predominantly by abundant capacity, light claims experience and the slowdown in world trade.
Marcus Baker, chairman of Marsh's Marine Practice, said in a statement: "Falling demand meant fewer ships carrying less cargo at slower speeds. This directly led to a reduction in the number and size of claims. In addition, plentiful insurance capacity has encouraged insurers to sacrifice underwriting profit for market share.
"For marine companies wanting to take advantage of these market conditions, standing out from the pack in terms of best-practice risk management is critical to securing the best terms," he continued. "In most parts of the marine market, underwriters are willing to take a long-term view if they believe their relationship with the client is sufficiently strong. They are also willing to compete aggressively for attractive new business."
The report notes that risks judged excellent or good can see rates go from flat to a decrease of 10 percent in one of five market regions in the survey. However, a risk judged poor could see a rate increase from 10 to 15 percent. Actual rates are judged on the quality of the submission, the report states.
In the past, marine rates have been a volatile marketplace, the report says, but for a number of reasons, rates are projected to remain soft for "the foreseeable future."
One major reason for the continued softness is that capital continues to flow into the market because results have been "relatively stable and stability is attractive to capital providers."
As an example of stability, over the past 10 years the Lloyd's gross loss ratio has improved from triple digits in 1999 and 2000 to the 90s. In fact, the best year was 2003 when the loss ratio came in at 59. In 2008, the last recorded in the report, the ratio stood at 90.
However, as the world economy improves and the demand for shipping picks up, the report cautions that so, too, might claims, which could drive rates back up. There is also concern that as the number of ships on the sea grows, that there will be a lack of qualified crews to man the burgeoning fleets.
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