Cargo
New business appetite at record levels
London Cargo market appetite and capacity has been growing for several years and has now reached an all-time high. For new business to the market, insurers continue to be increasingly aggressive with their pricing as carriers try to grow their market share while rates remain at a reasonable level. In the absence of a market-changing loss event, this is anticipated to lead to a softening of the market.
The Freight and Logistics market is beginning to ready itself for an extended period of growth, but with insurers looking to maintain current rating levels. The Livestock and Aquaculture markets remain healthy despite insurers showing concerns around the consequences of climate change-related claim events, as well as animal disease transmission.
Changes in policy terms and conditions
There are currently no major changes in terms and conditions, but some insurers are submitting creative responses to accommodate specific risk exposures. Overall, there are no signs of deterioration in coverage at this stage.
Underwriting changes
Amphitrite (Scott Sykes and Fadi Faysal) is adding Cargo to its current Hull and Machinery managing general agent (MGA) offering. This capacity is effective from 1 September 2024. Furthermore, two ex-Ascot underwriters (Gavin Wall and Chris McGill) are launching their start-up MGA, Rubicon. They are likely to start underwriting Cargo from January 2025. Another notable re-entrant has been Sirius Point, which underwrites both Cargo and Freight Liability portfolios.
There are a few people moves worth noting. Jack Bryan has resigned to start up Unicorn Underwriting. David Pressman is joining Markel, and Ben Beaumont is joining Westfield Specialty.
Notable claims
A few large-to-medium-sized stock losses, plus the Baltimore bridge collision, have kept insurers mindful of the need to maintain underwriting discipline. Nevertheless, London Market insurers are reporting good levels of underwriting profitability. Inflation has affected the replacement cost of claims, but since Cargo policies are declaring exposures – and therefore paying premium on updated valuations – it’s not affecting claims ratios at this time.
Geographic/sector differences
Some sectors including Retail Stock Throughput (STP), tobacco, mobile phones, and auto are traditionally less popular with underwriters due to historical adverse underwriting results. Nevertheless, we are noticing more carriers willing to broaden their general appetite to the aforementioned challenging segments since margins have improved and insurers are eager to grow their overall portfolio size.
New solutions
Lockton will soon launch SupplySure, which will offer a combined solution for STP and Product Recall coverage and provide a package discount for clients purchasing both coverages. We are initially targeting the Food and Beverage and Automotive sectors. Cargo underwriters are receptive to creating bespoke coverages on a case-by-case basis. Brit and RSA have launched the Build Consortium for project cargo and Delay in Start-up (DSU) and Chubb has launched their Chubb Battery Consortium.
Another notable re-entrant has been Sirius Point, which underwrites both Cargo and Freight Liability portfolios.
Outlook
Expected range in rate changes for the next 6 months for claims-free portfolios
Without any market-changing loss events, we are expecting rating reductions to be a feature of H2 2024. Profitable business – particularly if it hasn’t been remarketed for a number of years – may attract rating reductions of up 10%. The renewal outcome will be very dependent on the individual, risk by risk, strength of the loss mitigation story, the variation of insured values, and extent of natural catastrophe exposure. New entrants that joined the market in 2020/2021 have grown in size and confidence and are now seeking leadership positions. This is challenging the status quo and is helping to create firm competitive tension. Loyalty has clear client benefit, but the increased market competition offers buyers alternatives which should be fully considered.
Expected capacity change in the next 6 months for claims-free portfolios
London Market capacity is at an all-time high and will increase further. We estimate the London Market primary and excess capacity to be in the region of USD 1.7bn, cementing London’s position as the global Cargo market leader.
Expected coverage change in the next 6 months for claims-free portfolios
London Cargo market appetite and capacity has been growing for several years and has now reached an all-time high.
We estimate the London Market primary and excess capacity to be in the region of USD 1.7bn, cementing London’s position as the global Cargo market leader.
Renewal recommendations
Insurance buyers should engage in the renewal process as early as possible to set expectations and agree on a firm renewal strategy. A clear differentiating factor in the London Market are face-to-face meetings to build a rapport with underwriters. Evidencing good loss control and risk mitigation measures regularly translates into better policy terms.
For further information, please visit the Lockton Specialty page, or contact:
David Ripton
Head of Marine & Cargo
E: david.ripton@lockton.com