AXA XL’s Jonathan Holmes, Head of Marine Hull, Asia and Cedric Declercq, Claims Practice Leader & Manager, APAC provide regional insight.
How has Asia’s (re)insurance marine hull market fared in terms of GWP growth and rates in 2022?
Holmes: We anticipate that in 2022, the hull market will report an overall rate increase in the mid-single digits. While this figure is less than in previous years, it shows that on the whole insurers are still focussing on bottom-line profitability and sustainable underwriting, cautiously navigating their way through a challenging and changing risk environment throughout 2022.
In terms of GWP, it is likely growth will be similar in percentage terms as most established underwriters remain selective in their underwriting with a focus on risk quality. Current high levels of inflation and other factors have also focussed the minds of underwriters as we attempt to protect portfolios against an uncertain risk environment.
After a lull, claims have once again been rising in the region, why is this and what measures are being taken to counteract the trend?
Declercq: From 2005 onwards, we have seen a long-term downward trend of marine hull insurance claims – with an extraordinary drop in 2020 as a result of Covid-19. The increase in claims recently has been expected after an increase in shipping activity following the pandemic.
The pandemic has caused considerable disruptions to the global supply chain, particularly caused by a series of lockdowns in different countries. Despite the lockdowns having ebbed away, carriers and freight companies are still coping with the logistical issues caused by those lockdowns.
Shipping activity and freight prices have increased as a result, particularly on container carriers. This is the result of soaring global demand of container space on relevant carriers combined with the dislocation of containers, congested ports, the rise of e-commerce and tight deadlines in respect of the supply chain. This in turn has resulted in an increase in claims activity on container vessels.
Awareness is key here. We are working very closely with our broker partners and clients in order to constantly raise awareness of these issues, to help ensure that our clients are adequately insured and prepared for the reality of the situation. We are also partnering with our risk engineers and relevant experts in order to be in the best position to respond promptly and effectively to help our clients mitigate their exposures and to ensure the overall impact to their business is minimised during these very challenging times.
What has been the impact from the Ukraine conflict on Asia’s marine (re)insurance market?
Holmes: The Ukraine conflict has of course impacted Asia’s marine insurers and we have had to adapt to a changing risk environment as well as new and evolving sanctions. These changes in approach have been observed most clearly in the amendments to the Joint War Committee listed areas to include Russia, Belarus and waters and ports in the Black Sea and Sea of Azov.
These new listed areas reflect the increased risk to clients when operating in these areas and insurers have had to charge additional premium accordingly, where coverage is permitted under the current sanctions. Our clients are similarly facing a number of challenges to their operations, and we have had to adapt quickly to provide clients with as much certainty around their insurance coverage as possible.
What is the Asia marine hull (re)insurance market outlook for 2023 and how is AXA XL looking to position itself?
Holmes: Several years of rate increases have attracted some new capacity into the market in recent months which has tempered rate momentum. However, most mature markets appreciate that globally, pricing is still not at a technically adequate level. Additionally, a combination of large losses in the marine and aviation war markets arising from the Ukraine conflict, natural catastrophe losses, significant claims’ inflation and general inflation will put pressure on marine treaty reinsurance renewals. These additional costs will have to be reflected in insurance pricing.
As such, hull insurers cannot afford to take their eye off the ball and reduce rates if they are to maintain longer-term pricing sustainability. AXA XL is one of the largest global marine insurers and we shall maintain our long-term commitment to the hull market and our commitment to providing consistent pricing and a market-leading claims service through best-in-class underwriting and claims leadership capability.
Reach out to Singapore-based Jonathan at [email protected] and Singapore-based Cedric at [email protected]
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Jonathan Holmes, AXA XL
Tracking Asia’s volatile marine market
Jonathan Holmes, AXA XL