IUMI President: Premium rates should increase to keep pace with insurance exposure

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Deirdre Littlefield, President of the IUMI (International Union of Maritime Insurance) and a senior vice president of Starr Marine Agency, Inc., outlined in an interview with AJOT, challenges facing the global maritime insurance industry.
The IUMI, established in 1874, is an international trade organization that represents the interests of marine underwriting associations from 54 countries around the world. Through its seven technical committees IUMI tackles current and developing underwriting and claims issues, maritime safety, loss prevention, pending legislation and marine statistics. New York City based-Starr Marine is a leading global provider of marine insurance products and services.
By George Lauriat, AJOTAJOT: Even with the current economic issues global trade is increasing. Given that most of the trade is written in local currency and the US dollar’s recent decline, what impact has this trend had on premiums?
Littlefield: It has been widely reported that premium rates have been weakening in the marine sector over the last 12 to 18 months when in fact all the signs we track at IUMI indicate that just the opposite should be happening. We are in a period where freight markets are booming and vessels are being worked harder and longer to maximize ship owners’ profits. Larger and more expensive vessels are being introduced into service, which significantly increases hull values and dramatically increases cargo accumulations. At the same time, the shipping industry is in the midst of a serious global shortage of qualified officers and crews brought about in part by rapid growth of the world merchant fleet. In addition, the number and dollar amount of serious partial losses continues to increase and for the first time in nearly a decade IUMI has reported the number of total losses has increased significantly. All of these factors indicate to me that premium rates should be increasing, at the very least to keep pace with the increasing exposure environment.
AJOT: Marine insurance market – Europe and Asia account for a vast majority of the marine premiums do you see any changes in the market in the near future?
Littlefield: Europe, which includes the UK, is the largest marine market in the world with 12.5 Billion (USD) in premiums reported to IUMI in 2006. This represents a market share of almost 64%. Asia/Pacific is next with 4.3 Billion (USD) a 22.4% market share. North America reported 2.3 Billion (USD) a market share of 11.7%. I do not see a significant change in market share in the near future.
AJOT: On a box ship how is exposure estimated? Does the marine insurance industry have to overhaul the current system of “estimation” to keep pace with the increased risk associated with bigger box ships and higher value goods?
Littlefield: Vessels have doubled in size and value, cargo accumulations soar, and dangerous goods continue to be improperly classified and transported, especially in containers, threatening the safety of the vessel and her crew and posing an environmental hazard. These dynamic factors make accurate assessment of risk even more technically challenging for marine underwriters. IUMI’s Facts and Figures Committee is working with member associations to gather data on cargo accumulations in order to assist our members more accurately determine exposures.
AJOT: On the shipside of the equation, total losses and partial losses appear to be climbing after a relatively good period. What are some of the factors involved in ship loss and have they changed much over the decade – i.e. factors like weather, crewing or even the shift in shipbuilding. With Korea and China accounting for the majority of the newbuildings will the pressure to turn ships potentially increase risk?
Littlefield: The number of total loses had declined dramatically since its high of over 225 in 1982 to approximately 67 when IUMI released its statistics for 2006 at the beginning of 2007. Unfortunately as 2007 progressed we have

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American Journal of Transportation