The marine insurance industry is bracing to meet an expected upswing in multidimensional risk across product lines.
That is the consensus of many panelists speaking Tuesday at the Marine Insurance Americas conference in New York.
Rising inflation is among the most prominent emerging risks. It increases the cost to settle valid marine casualty and damaged cargo claims.
“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 of Aon’s US marine practice.
More specifically, speakers lamented that the industry faces 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,” said Munich Re’s Dalton.
In fact, both the cost as well as the frequency of payable total constructive loss and damaged cargo claims are increasing, panelists said. That is due, in part, to unpredictable, climate-related events.
Marine insurers offering carriers protection against worker injuries recently have been ‘on the hook’ for several “nuclear” and “thermonuclear” claims, said Molly McCafferty, claims director for Americas at The American Club. It is a protection and indemnity mutual insurer.
Underwriters offering this coverage are “facing a different world in the last three or four years,” said Peter Cridland, vice president at Trans Re.
Mitigating the impact are increasingly successful efforts by insurers to convince appeals courts to overturn or reduce what carrier defendants claim are excessive awards.
Separately, more frequent, late arriving cargo is a growing, but usually uninsured risk. Increased caution, exercised by merchant mariners who more frequently rely on third-party weather optimization services, is a root cause of the delay, said Michael Venturella, practice leader for marine group at Envista Forensics, an engineering forensics company.
And 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.