This report contains an overview of the total size and profitability of the UK marine insurance market. It provides analysis of trends in premium rates and claims, as well as a discussion of the current issues affecting the market.
Description
INTRODUCTION
This report contains an overview of the total size and profitability of the UK marine insurance market. It provides analysis of trends in premium rates, distribution, and claims as well as a discussion of the current issues affecting the market. The final section analyzes the key drivers that will affect each of these markets going forward while providing a forecast up to 2015.
FEATURES AND BENEFITS
Data on the size, structure and profitability of the marine insurance market in the UK.
Analysis of the drivers of claims and costs as well as an exploration of growth areas in the future.
A discussion of the main factors affecting the marine market in the future along with forecasts of market size to 2015.
HIGHLIGHTS
There has been a continued increase in the number of UK-owned and flagged vessels as ships ordered before the recession are completed. These ships have contributed to a worldwide glut of shipping and have given underwriters a growing market to write.
The main challenge affecting the UK cargo industry is the impact of the recession on cargo levels. As consumers and firms import and export less, the volume of cargo to and from the UK falls. As the number of risks to insure falls, insurers have to compete for ever scarcer risks.
YOUR KEY QUESTIONS ANSWERED
What are the key drivers and challenges within the UK marine market in 2011?
What are your competitors doing and what are the drivers of growth in the market?
Where market will growth come from and how will economic and claims trends will impact the sector?
Table of Contents
TOC
OVERVIEW
Catalyst
Summary
EXECUTIVE SUMMARY
The marine market is recovering from the effects of the downturn
GWP has grown by £196.6m to £5.1bn as the economic recovery continues
Marine COR has remained profitable for the past four years
Long-term profitable CORs continue to attract capital
The UK's commercial fleet is growing
A backlog of ship orders has led to increased shipping volumes
A growth in UK-flagged shipping is being supported by the UK government
UK maritime revenues have performed well during the downturn
Most marine sectors have seen a continued soft market
Low CORs during 2007-10 have attracted competition to the market
Increases in P&I premiums have been minimal from 2010 onwards
Low cargo volumes and containerization have reduced differentiation in policy cover
Traditional offshore energy is valuable but is in long-term decline
Berkshire Hathaway, ACE, and Torus saw strong growth during 2010
The marine market will experience weak growth as the market remains soft
Profitable CORs and a troubled underlying market will keep premiums from hardening
MARKET CONTEXT
Introduction
The marine market remains strong while recovering from the downturn
GWP has grown by £196.6m to £5.1bn as the economic recovery continues
Global economic turmoil has impacted the UK shipping industry
Marine COR has remained profitable for the past four years
Long-term profitable CORs continue to attract capital
The marine market is composed of a wide variety of sectors
Offshore energy has grown to become the largest marine sector
The economic recovery has allowed some sectors to reach and surpass pre-recession GWP levels
The UK's commercial fleet is growing
A backlog of ship orders has led to increased shipping volumes
A growth in UK-flagged shipping is being supported by the UK government
UK maritime revenues have performed well during the downturn
The Marine Insurance Act will be re-enacted during 2012
Changes to UK regulation will be broadly positive for the sector
An EU competition review may limit P&I reinsurance capabilities, further hardening the market
Global political and environmental factors are impacting the UK marine market
The melting of Arctic ice will give underwriters two untested shipping routes
A drive for efficiency and reducing environmental impacts is changing vessels' risk profiles
Renewable offshore energy has the potential for strong income increases
Traditional offshore energy is valuable but is in long-term decline
The world will look to the UK as the leader in renewable offshore energy and offshore insurance
Offshore renewable energy is a relatively untested risk
Offshore energy technology is evolving and will gradually reduce offshore hazards
Offshore renewables offer a unique set of new risks
Cargo insurance remains soft due primarily to a commoditized market
Introduction
Low cargo volumes and containerization have reduced differentiation in policy cover
Containerization and commoditization mean cargo rates have remained stable
An increased stockpiling of cargo is giving insurers an opportunity to increase cargo rates
Increases in hydrocarbon imports are giving a means to differentiate cover
Solvency II regulation is requiring cargo underwriters to price their reserves more accurately
The hull and machinery sector continues to operate with soft rates
Introduction
Low CORs during 2007-10 have attracted competition to the market
A hardening in the reinsurance market is not expected to have a material impact on hull rates
The falling cost of repairing vessels has reduced pressure on claims expenses
Large claims can impact the market heavily and have the potential to harden the market with one incident
The average cost per claim for fires and explosions has increased sharply
The P&I market has hardened slightly in response to global events
Introduction
The P&I market structure allows for a wide spread of liability risk
Increases in P&I premiums have been minimal from 2010 onwards
Pollution is leading to an adverse claims environment, pushing rates up
Personal injuries and marine deaths continue to drive claims expenses
Responses to piracy are requiring increased P&I cover
The pleasure craft sector remains stable
Pleasure craft account for more than 75% of UK inland craft
Pleasure craft have limited penetration among UK consumers
Low consumer confidence is limiting premium growth
DISTRIBUTION DYNAMICS
Introduction
Brokers remain the most popular distribution method
Brokers account for 80% of MAT premiums
Brokers play an important role in placing pleasure craft cover
Larger brokers are more likely to provide marine cover
Brokers value low price and good cover when choosing marine insurers
Aviva is the most popular broker choice for marine risks
Pleasure craft brokers use local relationships to distribute marine insurance
Brokers target pleasure craft and SME owners via online and press marketing
COMPETITIVE DYNAMICS
Introduction
Berkshire Hathaway, ACE, and Torus saw strong growth during 2010
Lancashire Holdings has rapidly increased its GWP
RSA achieved a profitable COR supported by low administrative expenses
Torus is expanding rapidly
ACE has grown aggressively and will be looking for acquisition opportunities in 2012
The makeup of the top five insurers by line suggests that each product requires a distinct approach
FUTURE DECODED
Introduction
The marine market will experience weak growth as the market remains soft
Profitable CORs and a troubled underlying market will keep premiums from hardening
Brokers expect marine premiums to remain stable during 2012
Offshore energy will have mixed fortunes over the next five years
Cargo insurance will remain commoditized
Hull and machinery premiums will be supported by a fall in claims costs
P&I premiums will benefit from a return to growth but may be constrained by geopolitical events
APPENDIX
Sources
Ask the analyst
Disclaimer
TABLES
Table: Marine insurance breakdown by market (£000s), 2006-10
Table: UK marine market performance ratios (%), 2007-10
Table: London market premium breakdown (%), 2006-10
Table: London market GWP breakdown (£000s), 2006-10
Table: Number of UK-owned trading vessels over 500 gross tons by volume, 1999-2009
Table: UK and crown dependency registered trading vessels over 500 gross tons (1,000 tons), 1999-2009
