The marine insurance industry is bracing to face expanded, multidimensional risk.
That is the consensus of a number of panelists speaking Tuesday at the Marine Insurance Americas conference in New York.
Among the most prominent risks emerging is inflation that increases the cost attached to settling valid claims for marine casualties and damaged cargo.
“Fundamentally, the cost of loss is rising,” said Sean Dalton, executive vice president, head of marine insurance at Munich Re. “The goal is to catch up, not keep up,” he said.
“Undervaluation is a problem,” added Patrick O’Neil, managing director, US marine practice AON.
Speakers lamented that is industry is facing renewed challenges given that it no longer benefits from a low interest rate environment that began in 2008.
“Money has been free since 2008. It is changing,” Munich Re’s Dalton.
In fact, both the cost and frequency of total constructive losses and damaged cargo claims are increasing, panelists said.
Troubling to marine insurers is the increased number of claims tied to unpredictable, climate-related events.
A related, but usually uninsured “peril” is more frequent, late arrival of cargo. Late arrival is caused, in part, to added caution exercised by merchant mariners who increasingly are relying on third-party weather optimization services, said Michael Venturella, practice leader of the Marine Group at Envista Forensics, an engineering forensics ccompany.
Larger ships calling at major, congested container ports, essentially, “a single point of failure,” also add to those delays, said Charlie McCammon, senior vice president of risk consulting at Willis Towers Watson.
Separately, marine insurers recently have been on the hook for several “nuclear” and “thermonuclear” verdicts related to mariner injury claims, said Molly McCafferty, claims director Americas at The American Club, a property and indemnity mutual insurer.
Insurers are “facing a different world in the last three or four years,” said Peter Cridland, vice president at Trans RE.
Mitigating the impact for insurers is their success in convincing appeals courts to reduce some awards.
Ira Breskin is a senior lecturer at State University of New York Maritime College in the Bronx, NY and author ofThe Business of Shipping (9th edition, 2018), a primer that explains shipping economics, operations and regulations.
