Another challenging year of losses has seen pressure to increase pricing in marine. But it starts to feel like a raw deal for the client when cover is reduced at the same time, says AFL Marine Director Alexander Mott.
The string of significant cargo and hull claims that led to Lloyd’s posting a 2018 marine combined ratio of 116% is sure to engender further changes and challenges in 2019.
There is a legitimate fear that these types of complex losses will continue, and without significant pricing increases, there will be further unprofitable years for marine at Lloyd’s.
But pushing for rate rises at a time when there is little continuity and stability – with at least nine well-known players exiting the Lloyd’s marine market and counting – has handed an opportunity to many local and international markets to compete on pricing.
A raw deal for insureds
We’ve also seen a changing risk appetite in the London market. Scrutiny of the breadth of cover is leading to tighter wordings, particularly when it comes to quotations for older tonnage and smaller to medium sized shipping operators.
While this is understandable given the complexity of the losses the market has seen, it starts to feel like a raw deal for the client when the price is increased along with cover being reduced. After all, these are often not long-standing relationships that insureds enjoy with Lloyd’s, and yet many are suddenly finding that this is no longer the home for their risks.
Broker facilities favour larger clients
Moreover, a significant reason why the smaller to medium-sized shipping operators are affected more than the larger, conglomerate shipping organisations is the fact that many larger insurance buyers enjoy access to larger broker facilities, and obtain competitive pricing with less scrutiny despite not necessarily having better claims records than the SMEs.
It is simply not a level playing field. If Lloyd’s was prepared to place all business on a facultative subscription basis, it would allow everyone to compete on the same level.
This lack of continuity and market instability has led to many assureds approach us for a second opinion on their insurance placements. Clients are seeking expert support navigating the changes and uncertainties that abound in our sector of the insurance market.
Need for earnings transparency
Throughout my career, which is pushing 20 years now, I’ve always felt that the Lloyd’s market was flexible, unique and innovative, providing solutions to the most challenging and complex marine risks.
The market must not lose this area of expertise, but we are already seeing international markets gaining in market share due to the scrutiny and pricing that is now applied to many marine risks at Lloyd’s, particularly for SMEs.
In navigating these challenges for clients, we support the opinion that there needs to be more transparency over fees and earnings within the Lloyd’s marine market.
AFL now places a diverse range of risks for clients in multiple territories including Turkey, Greece, Germany, France, Lebanon, and in LATAM regions where we have recently developed key partnerships in Argentina, Brazil and Mexico.
Innovation in marine insurance will come from working with those that have the expertise to understand client needs, and will provide transparency and insight to offering the most secure and relevant products available.
Today we very much feel that we are an international marine broker, which with our flexibility places us in a strong position to provide best value to the client. We look forward to continuing this drive.