Marine Hull & Machinery
The London Market is showing growing appetite for Marine Hull and Machinery risks and capacity available is expanding as new players enter this insurance line.
Notable claims
Insurance payouts following the collapse of a bridge in the US city of Baltimore could be among the largest ever in marine insurance. The Francis Scott Key Bridge collapsed after the Dali, a container ship, lost power before striking the bridge on 26 March. The total cost whilst still subject to legal process could be in excess of USD 3bn. Claims for the bridge could reach USD 1.2bn, according to Barclays, predicting further potential liabilities of USD 350m to USD 700m for loss of life and undetermined payouts for business interruptions.
The vessel’s hull and machinery insurance cover had been renewed just three days before the accident, according to Seatrade Maritime News, and the policy valued the vessel at USD 90m. However, with vessel repairs estimated to be “at least USD 28m,” and salvage costs expected to reach USD 19.5m the value was eroded. Court documents reveal, the estimated value of the ship was USD 42.5m.
Shipping attacks in the Red Sea are also mounting. In August, the Sounion, which was carrying 150,000 tonnes of crude oil, was first hit by gunfire from two small boats which approached it 77 nautical miles (143km) west of the Yemeni port of Hudaydah. Later, the ship was struck by three unidentified projectiles, which sparked a fire and left it without engine power. As of mid-September salvage operations had finally begun, though the vessel still burns.
Underwriting changes
Three managing general agents (MGAs) have started underwriting Marine Hull & Machinery: two ex-WTW marine brokers have launched Gardian Marine which is backed by Lloyd’s and London underwriting capacity; Clearwater UW was started by ex-Beazley underwriter Richard Young backed by London capacity, and Tom Fulford-Smith and Charles D’Alton have launched MGA Ai Marine.
Geographic/sector differences
Rates are softening independent of geographies due to increasing capacity.
New solutions
AXA XL is developing a new insurance product to protect carbon credit investments.
Outlook
Expected range in rate changes for the next 6 months for claims-free portfolios
There is an increased appetite in the London Market for ship construction risks in particular which is causing rates to fall. This is driven by the perception that each new project represents a growth opportunity.
Expected capacity change in the next 6 months for claims-free portfolios
Capacity is increasing across the board as insurers are targeting growth.
Expected coverage change in the next 6 months for claims-free portfolios
Renewal negotiations will primarily revolve around price as opposed to coverage.
Loyalty to your chosen insurer does usually pay off in the end, and in the current environment we advise clients to focus on negotiating improvements in the terms of the contract as insurers show growing risk appetite and capacity is on the rise.
Emerging risks
The pursuit of carbon neutrality and other green initiatives are stirring a lot of debate about alternative fuels, new propulsion units, and the change in risk profile this creates for underwriters.
Renewal recommendations
Loyalty to your chosen insurer does usually pay off in the end, and in the current environment we advise clients to focus on negotiating improvements in the terms of the contract as insurers show growing risk appetite and capacity is on the rise.
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