Marine rates continue up says Gard

Hull insurance rates were up by some 9% during H1 and could be set to increase by between 5% and 10% in the second half, according to Gard’s chief underwriting officer Bjørnar Andresen in an interview reported in Lloyd’s List.

While much of the increase could be attributed to a general hardening of the hull market, another factor, compounding the general rises, came from rising costs at repair yards, caused in part by the Covid-19 pandemic and in part by increasing steel prices.

Andresen said in an interview that there had been no increase in casualty frequencies – “if anything the trend has been benign” – but the cost of repair had increased. “The spare parts, the steel and the yards themselves when doing the work, are asking much higher prices than in the past, so individual claims are more expensive.”

“Now we see that when you have a performing account, you actually can limit your increase. If you have losses on a hull account, it will go up much more,” Andresen said.

On the liability side, Andresen said that Covid-19 had taken its toll on the underwriting result, but that it was not a major event-type incident. “It’s lots of work, more a matter of exhaustion on people, and aggregates into lots of claims of lesser amounts that makes an impact on the balance sheet”, he said.

The CUO also reported that there had been significant deterioration in the 2019 policy year, while for the 2021 year, although there had been two significant events in H1 (since February 20th 2021) – X-Press Pearl and Ever Given – it was too soon to say how the whole policy year would pan out. He noted that in 2020 H1 was dreadful, but H2 had been benign.

All clubs have been referring to the increase in the relative importance of pool claims in recent years, and Andresen was no exception. He noted that there had been three consecutive years of significant pool losses (those above $10m), but he cautioned that it was “too early to talk about trend shift”.

He felt that, with combined ratios ranging from 104% at Gard to as high as above 140% for some other clubs, there was little doubt that rates would rise for P&I, although the extent of the increases would differ between clubs.

Andresen also referred to the elephant in the room, the fact that the International Group concluded a two-year reinsurance deal in early 2019, and so therefore had avoided any rate re-evaluation as a result of the events of 2020, and that there was zero chance that reinsurance rates from February 2021 would not be higher.

Andresen noted that reinsurance markets were generally up by about 10%, but that the pressure was beginning to ease at the mid-year renewals.

Andresen warned that the massive publicity surrounding the Ever Given incident could mean reinsurance underwriters would be more wary of taking on shipping risk.

“Having said that, this is a special contract. Although we are dependent on the larger reinsurance market, it is a very large contract handled on its own merits, so it’s hard to tell what the rates will be this year. But owners will have to expect a rise,” he warned.

SOURCE: LLOYDS’ LIST / INSURANCE MARINE NEWS