The marine insurers that survive and thrive will be those whose leaders seize the opportunities that technology can bring.
It’s rough out there. In the world of marine insurance, syndicates are shutting down, losses are mounting and Lloyd’s is demanding turnaround plans for the worst-performing 10% of insurers’ business.
According to Jim Mulrenan, a recently retired veteran of TradeWinds, from 2010 to the end of 2017 fewer than half of the 79 marine insurance syndicates were profitable. Over the past three years, just 16 out of 71 syndicates made money. Since June 2017, seven marine insurers have shut up shop. More may follow. For those that remain, though, we at Windward
see a great opportunity that - if seized - could help marine insurers regain their collective mojos.
Start with the syndicates that have left the building. They’ve reportedly trimmed marine underwriting capacity at Lloyd’s by $100 million, or about 5%. Fewer shops writing ships should lead to higher rates, as there would be less capacity. Swedish Club Managing Director Lars Rhodin says hull rates have already “bottomed out.”
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The good news doesn’t end there. As ship owners find the insurer they’ve used for the best part of a decade is no longer around, they’ll be forced to take their business somewhere new. This poses a dilemma for insurers: On the one hand, they want the new business, as it should mean more profits; but on the other, they don’t know these “new” fleets and owners as intimately as their existing portfolio, and so they worry about taking on unknown risks.
New business takes up the slack from renewals
It’s an understandable concern and one that will likely grow as new business becomes a larger share of insurers’ portfolios versus renewals. We believe the best way to assuage these concerns is technology: Marine risk analytics bridges the gap in underwriters’ knowledge of new owners and fleets; it helps them efficiently evaluate potential new business and pounce on the risks they like.
With budgets strained, chief underwriting officers and heads of marine are right to keep a firm grip on the purse strings, even in anticipation of higher profits. Investing in technology always throws up questions - will it work (yes, it’s already working), will we get a return on investment (yes, it’s already delivering value), will our team be able to work with it (yes, it’s intuitive) or will they worry about losing their jobs (they shouldn’t; they’ll now have a competitive edge)?
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Ultimately, the marine insurers that survive and thrive will be those whose leaders seize the opportunities that technology can bring. We strongly believe that the time to act is now. Because if it’s not, it may be never.