LONDON/NEW YORK: Rivals to Lloyd’s of London are riding a rising tide of marine insurance rates, leaving the 330-year-old market behind after it jettisoned sections of its oldest line of business last year.
Premiums for marine insurance, which until 2018 had fallen for years due to rising competition and lower claims, are increasing after a surge in catastrophe losses in the past two years and growing geopolitical tensions..
For Lloyd’s, still reeling from two years of losses due to the heavy claims from natural disasters, it will still take 12-24 months before the segment returns to profit, Chief Executive John Neal told Reuters in New York last week.
Neal said that although the sector had performed better in the first quarter, syndicates needed to set “the right price” for the risks and consider whether all types of marine business were insurable after Lloyd’s told its 99 members to cut the worst 10% of their business last year.
Broker Gallagher said in a February report that 10 Lloyd’s syndicates have withdrawn or reduced their marine business. That has benefited the smaller London company market, which operates separately in the City.
“We are definitely seeing business from Lloyd’s coming through our door,” said a senior London company market insurer.
Marine cargo rates are up 12-14% this year, Miles Taffs, head of marine and aviation at Lloyd’s for MS Amlin, said, while sources say yacht rates have risen by at least 20%, and by triple digits in some locations.
“The (London) company market has demonstrated greater flexibility in its approach, as have other European markets, particularly France and Scandinavia,” Alexander Mott, marine director at broker AFL, said.
The Standard Syndicate at Lloyd’s no longer writes new business, while other firms have moved. Norwegian marine insurer Skuld said it will close its Lloyd’s syndicate in July, and switch the business to Oslo and the London company market.
Against this backdrop, Asia Pacific and North American insurers have won business in marine cargo, said a spokeswoman for the International Union of Marine Insurance, which said global marine insurance premiums totalled $28.5 billion in 2017.
And the United States and Scandinavia have also gained from the move away from Lloyd’s, Carl Day, vice president, property, marine and energy at CNA Hardy, which pulled out of marine hull insurance last year, said.
Although marine insurance slipped to 7% of business at Lloyd’s in 2018, down from 8% a decade ago, it remains bigger than energy, motor or aviation.
Lloyd’s, which started life providing shipping information and insured ships during the American Revolution and the Napoleonic Wars, has a huge chunk of that market.
Its marine insurance and reinsurance gross written premiums totalled 3.8 billion pounds ($4.85 billion) in 2017, nearly double comparable business in the London company market, the International Underwriting Association said.
But the IUA is compiling premiums data for the London company market for 2018 and has so far seen a rise in business, including in marine, a spokesman said.
While Lloyd’s is still dominant in the market, it cannot afford to take its historic strength for granted.
“The Lloyd’s market is still the most important marine hub in the world, but it needs to adapt ... rather than hoping that business will simply come back,” AFL’s Mott said.