A KEY message from the results of the first premium income survey carried out by the International Underwriting Association is that, according to chief executive Dave Matcham, London is the place to go for speciality business. He was able to draw this conclusion despite the fact that marine and energy accounts for only 12% of London company market total premium, and 13% of Lloyd’s premium.
Such figures do not always reflect the relative importance and intellectual capacity of the leaders in London, Matcham said in this regard. London underwriters might, for instance, provide input to weighing up a risk that ended up being written in a company’s parent office overseas,
All the same, marine and energy injected a respectable £1.9bn of premium income into London company market books in 2010, fractionally less than in 2009. Half of such business came from clients outside the UK and European Union. Matcham and the new IUA statistics committee are planning in further surveys to seek more detailed information by line: hull, cargo, liability, and energy for instance in the case of the marine class.
The focus on marine, dwarfed in volume terms by property and casualty, will be welcomed by delegates to the annual meeting in Paris thist week of the International Union of Marine Insurance, and by London’s joint marine market committees.
Meaningful profits from ocean marine are hard to come by, and offshore energy is notoriously mercurial, but it is noteworthy that these lines have dedicated adherents in London and internationally. The paradox in terms of marine hull was explained by Mark Edmondson of Chubb syndicate 1882 in a recent interview. Edmondson, chairman of the joint hull committee, said that the capital allocation needed to support a particular line of business varied, and in these terms hull insurance was popular with capital providers because it was short tail and non-capital intensive relative to many other lines, not tending to aggregate with more natural catastrophe-exposed lines of business.
Some hull underwriters have expressed concern about the effect of recent major casualties on the 2011 year. Edmondson suggests that this has shown that the premium base for hull and machinery underwriters in general needs to be strengthened. “There is no question that this line of business is volatile,“ said the hull committee leader, “not just as a result of very competitive rating premiums, but in terms of our risk environment.”
One area of close attention in the context of both London and IUMI is the commissioning of ever larger ships, with their technological, crewing and risk aggregation challenges. Data compiled during 2010 showed for example that in 2000 there were just six cruiseships of 100,000 gt or over in operation, compared with 41 currently in service and 15 under construction. From 1995 to 2005 the annual average delivery tally of containerships larger than 50,000 gt was 44; from 2005 to 2010 there were 96 a year being delivered; and some 355 are currently under construction.
Equally, we have seen rapid development in hi-tech LNG tonnage, with some 312 large liquefied natural gas carriers exceeding 125,000 cu m capacity operating at the 2010 count, and 47 under construction.
Although marine, energy and aviation might be minority partners in the market, says Matcham, it is quite clear that their global importance is significant.
One should not judge a sector’s value purely by turnover. The words of Robert Hiscox during a market trough are still cited today: volume is vanity, profit is sanity. He said then that he would rather his underwriters were out playing golf than writing unprofitable risks. The rationale is that only profitable operations will be there for the long haul to offer stability for their clients.
