During this year’s annual International Union of Marine Insurance (IUMI) conference, initial findings from IUMI’s major claims database were made available for the first time. Following three years of development, the database is now sufficiently reliable for IUMI to publish a set of global cargo claims data.
Dave Matcham, Chief Executive, International Underwriting Association; and project leader and secretary to IUMI’s Facts & Figures Committee explained, “We began this initiative by establishing and proving the concept three years ago.
Since then we have recruited 22 national insurance associations who are all IUMI members and together we have made a significant investment in gathering reliable and consistent data on both hull and cargo losses. This year – our third year of development – we have received 6,800 records of major (greater than $250,000) losses totalling $10.2Bn. Because cargo underwriting tends to be more evenly spread geographically than hull, we have more robust data for that insurance line, and we are now ready to make public our initial major cargo claims conclusions.”
Sufficient information dating back to 2013 has now been collected on a range of metrics and from this, five specific data fields have been identified where the data is reliable enough to be published, these are:
- Year of accident
- Underwriting year
- Loss amount
- Type of loss
- Mode of transport
Working in close partnership with IUMI Professional Partner, the Boston Consulting Group, IUMI has been able to undertake and publish some early analysis of this information. Examples include a year-on-year comparison of numbers of major cargo claims versus their average value; number of losses categorised by value range; value of different types of claims; and claim numbers and values attributed to various transport modes. The analysis was presented at the IUMI conference.
“This is a unique database that is beginning to give a meaningful global insight into major cargo claims. Information of this breadth cannot be found elsewhere, and it will allow underwriters to benchmark their own activity against global performance to better inform future decisions”, said Matcham.
IUMI is working to recruit more national insurance associations to increase the number of claims records contained within the database. It also intends to grow the number of reliable data fields so that further data analysis can take place. Once confidence in the hull data is at a sufficient level, IUMI intends to publish an initial analysis of global hull claims also. IUMI will publish the initial cargo analysis in its annual Stats Report later this year. Meantime, more information can be found from www.iumi.com
Althoug… global hull premiums reported at the conference this week were stable, Rama Chandran, Chair of the IUMI Ocean Hull Committee was more upbeat. He said, “Yesterday, our Facts & Figures Committee reported total 2019 global ocean hull premiums of $6.9Bn which is a very small increase of 0.2% from last year. However, there have been indications of a more significant market development recently and I am confident that the ocean hull sector is now on an upward trajectory – although the current gradient of the recovery remains shallow. We are starting a recovery from a very low and unsustainable base where our sector has suffered technical underwriting losses almost every year since 2005. Fundamentally, we have an ever-widening gap between an increasing amount of tonnage being insured and a decreasing global premium pot. The 2019 IUMI numbers show that global premiums have now stabilised and although the gap still remains, it is not widening so rapidly.”
Chandran believes there is cause for cautious optimism as the 2019 numbers do not account for the shrinkage of underwriting capacity in the hull market which really only took effect at the end of 2019 and early 2020. This was particularly felt in the London market where Lloyd’s took the decision to withdraw a number of marine syndicates. However, the hull market is continuing to suffer from an ever-ageing – and less valuable – fleet coupled with depressed newbuilding prices. An overall reduction in asset values will directly impact premiums.
According to Chandran, the impact of COVID-19 must also be carefully monitored. Vessel utilisation in some vessel sectors has significantly reduced and this has been reflected in an unusually low claims environment, however, this might be short-lived, “The coronavirus situation has made it difficult for owners to commission on-board inspections, secure spare parts and perform routine maintenance. Once the situation normalizes, we are likely to see a sharp increase in attritional claims. In general, total losses have reduced across all vessel types and this is extremely good news, but we are still seeing a worryingly high number of major on-board fires, particularly on containerships and – earlier this year – on a car carrier and a VLCC”.
Chandran also highlighted the issues with IMO2020 compliance. Whilst damage caused by fuel switching had largely been eliminated, there was significant cause for concern over an increased amount of engine damage as a result of accepting off-spec low-sulphur bunkers. Owners were being made aware of this issue, he said.
Summing up, Chandran said, “The ocean hull market has been operating unsustainably for many years and is now at a level where premiums will cover attritional losses only. Although COVID-19 has introduced additional uncertainty into our sector we are observing signs of a market recovery.”