Reverberations from Superstorm Sandy and the Costa Concordia disaster, as well as frequent movement among carriers both into and out of the segment, have shaped the face of the ocean marine insurance market for the past year.
John Barnwell, global head of Marine Americas for Allianz Global Corporate & Specialty, says he has seen multiple new entrants in the marine segment in the last few years, among them some carriers that have exhibited renewed interest in the market.
Many recent entrants had been attracted by the inland marine class, which showed handsome profits in 2009 and 2010—especially for those looking to diversify their books of business, Barnwell says.
Many of those new entrants didn't want to get in the market so much as to make a quick profit from it, however, and the large catastrophe activity in 2011 and 2012 weeded a lot of those newcomers out. First there was 2011's Hurricane Irene, a Category 1 storm that hit the upper East Coast and brought massive floods as far north as Vermont. The following year saw similarly devastating tornado and hail activity.
Tower Group and Aspen Group are among the carriers that have launched new marine units in recent months. Tower Group announced its entry into the marine & energy insurance market in July with the appointments of industry veterans Tom Guarnera and Jeff Kaufmann as division senior vice presidents of marine & energy; both hail from the U.S. office of ANV Holdings BV, a Netherlands-based company, which Tower acquired.
In addition to Guarnera and Kaufmann, who have a combined 65 years of experience in the market, Tower also took on other key ANV employees currently involved in the servicing of the marine & energy business.
Aspen Group launched its new U.S. marine, energy and construction unit in April, naming Tony Carroll executive vice president of Aspen Insurance in New York. Aspen already had a marine presence in the U.S., and a marine, energy and construction presence in London.
Previously, Aspen wrote only offshore for energy property damage. The insurer already has an energy offering in U.S. construction, writing policies for machinery equipment for a power plant or refinery; it also writes civil construction, Carroll says. Aspen has been in marine insurance for about eight years, offering offshore, liability and marine hull business through Lloyd's platform as well as its UK insurance company.
All the members of Aspen's U.S. MEC Unit have a strong engineering background, which creates engineering-based underwriting, Carroll says. "Our new team is built around veterans with 25 to 30 years' experience in the business. That's a big differentiation for us."
The company is moving from its temporary office to a permanent one in Houston this fall; the New York office is the starting point for the U.S. MEC platform.
"Our desire is to grow this into a global business, moving into strategic hubs to access the global business over the next five years. London Asia, Latin America, and the Middle East are all on the horizon," adds Carroll.
The main reason Aspen is getting into the marine space is shale gas in the U.S., which Carroll says is leading to significant opportunities. "There's a changing landscape of the expansion of petrochemical plants," he notes. "A lot of that had gone to the Mideast."
As for other marine writers, many of the newer entrants left the market following the bruising they took from Superstorm Sandy last November. Sandy made a sharp left turn into New Jersey, combined with a low pressure system coming off the East Coast, and made landfall during a high tide at a full moon. The storm caused significant inland marine and cargo losses.
Sandy compounded the large losses already absorbed by the marine market from the sinking of the cruise ship Costa Cocordia off the coast of Italy in January 2012, which left 32 passengers dead and two missing (and presumed dead).
Guarnera predicts the Costa Concordia salvage operation is going to cost more than $1 billion in claims—perhaps closer to $1.5 billion to $2 billion.
Even though the Costa Cocordia cruise ship is Italian, the cruise line is U.S.-based, Barnwell points out. The protection & indemnity piece of the cruise ship's demise is $1.18 billion, plus $485 million on the hull.
Marine insurance pricing in the Americas has seen moderate rate increases, especially for clients that have had losses and/or have significant natural catastrophe exposures (i.e., situated in coastal or flood zones, or sitting on a fault). Superstorm Sandy is blamed for rate increases in the cargo, hull and inland marine segments. Accounts with no losses or that are not seen as catastrophe-prone generally are receiving smaller increases or even reductions.
As for market capacity, Kaufmann at Tower says that there used to be a smaller number of marine insurers in the U.S. market, each with large individual risk capacity, but that has changed over the past decade. More recently, the individual risk capacity put out by companies has gone but there are more companies in the market, so overall capacity remains roughly the same. This broadening of the market hasn't pushed prices down, as companies have reduced the risk limits being offered with more quota share participation.
The marine environment is and has been stable in the U.S., with slight rate increases for exposures along the East Coast from Sandy. That area saw 5- to 10-percent rate increases in the second quarter, but now rates have flattened somewhat—which is expected to bring in more competition.
In the Gulf of Mexico, which is still recovering from hurricanes Katrina and Ike, accounts feel like they've already taken their increases. "Rates are a little flatter in that environment," says Kaufmann. "They are stable to still improving," he adds, but not as improved as he would like to see.
Tower's new marine & energy team produced some $30 million in 2012 premiums while with ANV Holdings BV, and says it expects to have a strong outlook for growth in the next five years. The unit will primarily consist of ocean marine, including hull, cargo and liability; offshore energy, including property and liability coverage focused on upstream energy; and inland marine.
Tower's M&E group will focus on the small-to-midsize customer—the middle-market size that Tower has been focusing on as a company, Kaufmann says.
"The predominant part of offshore energy is oil-and-gas related," he says. "The renewable-energy side of the marine business is growing as more operations like wind farms move offshore. Our largest focus in energy, however, is upstream oil & gas."
Aspen's U.S. MEC business now provides energy, property damage and construction related coverages. Builders risk (CAR/COC), ocean marine, fine arts and transportation products are available in the U.S. Its London business offers liability and offshore energy, adds Carroll.
Aspen's MEC Unit will handle primarily midsized-to-large businesses, inclusive in Energy mid-stream businesses, such as pipelines for gas as it is moved around and stored, gas plants and terminals.
Overall, Barnwell says, the marine segment remains strong, despite some major losses in recent months.
"You can have Sandy, you can have Costa Cocordia, and we're still here," he adds.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.