This report contains an overview of the total size and profitability of the UK marine insurance market. It provides analysis of trends in premium rates, distribution, and claims as well as a discussion of the current issues affecting the market. The final section analyzes the key drivers that will affect each of these markets going forward while providing a forecast up to 2015.Data on the size, structure and profitability of the marine insurance market in the UK.Analysis of the drivers of claims and costs as well as an exploration of growth areas in the future.A discussion of the main factors affecting the marine market in the future along with forecasts of market size to 2015.There has been a continued increase in the number of UK-owned and flagged vessels as ships ordered before the recession are completed. These ships have contributed to a worldwide glut of shipping and have given underwriters a growing market to write.The main challenge affecting the UK cargo industry is the impact of the recession on cargo levels. As consumers and firms import and export less, the volume of cargo to and from the UK falls. As the number of risks to insure falls, insurers have to compete for ever scarcer risks.What are the key drivers and challenges within the UK marine market in 2011'What are your competitors doing and what are the drivers of growth in the market'Where market will growth come from and how will economic and claims trends will impact the sector'

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UK Marine Insurance 2012
Published on April 2012
Report Summary
This report contains an overview of the total size and profitability of the UK marine insurance market. It provides analysis of trends in
premium rates, distribution, and claims as well as a discussion of the current issues affecting the market. The final section analyzes
the key drivers that will affect each of these markets going forward while providing a forecast up to 2015.Data on the size, structure
and profitability of the marine insurance market in the UK.Analysis of the drivers of claims and costs as well as an exploration of
growth areas in the future.A discussion of the main factors affecting the marine market in the future along with forecasts of market
size to 2015.There has been a continued increase in the number of UK-owned and flagged vessels as ships ordered before the
recession are completed. These ships have contributed to a worldwide glut of shipping and have given underwriters a growing market
to write.The main challenge affecting the UK cargo industry is the impact of the recession on cargo levels. As consumers and firms
import and export less, the volume of cargo to and from the UK falls. As the number of risks to insure falls, insurers have to compete
for ever scarcer risks.What are the key drivers and challenges within the UK marine market in 2011'What are your competitors doing
and what are the drivers of growth in the market'Where market will growth come from and how will economic and claims trends will
impact the sector'
Table of Content
OVERVIEW
'Catalyst
'Summary
EXECUTIVE SUMMARY
'The marine market is recovering from the effects of the downturn
- GWP has grown by £196.6m to £5.1bn as the economic recovery continues
'Marine COR has remained profitable for the past four years
- Long-term profitable CORs continue to attract capital
'The UK's commercial fleet is growing
- A backlog of ship orders has led to increased shipping volumes
- A growth in UK-flagged shipping is being supported by the UK government
- UK maritime revenues have performed well during the downturn
'Most marine sectors have seen a continued soft market
- Low CORs during 2007'10 have attracted competition to the market
- Increases in P&I premiums have been minimal from 2010 onwards
- Low cargo volumes and containerization have reduced differentiation in policy cover
- Traditional offshore energy is valuable but is in long-term decline
- Berkshire Hathaway, ACE, and Torus saw strong growth during 2010
'The marine market will experience weak growth as the market remains soft
- Profitable CORs and a troubled underlying market will keep premiums from hardening
MARKET CONTEXT
'Introduction
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'The marine market remains strong while recovering from the downturn
- GWP has grown by £196.6m to £5.1bn as the economic recovery continues
- Global economic turmoil has impacted the UK shipping industry
'Marine COR has remained profitable for the past four years
- Long-term profitable CORs continue to attract capital
'The marine market is composed of a wide variety of sectors
- Offshore energy has grown to become the largest marine sector
- The economic recovery has allowed some sectors to reach and surpass pre-recession GWP levels
'The UK's commercial fleet is growing
- A backlog of ship orders has led to increased shipping volumes
- A growth in UK-flagged shipping is being supported by the UK government
- UK maritime revenues have performed well during the downturn
'The Marine Insurance Act will be re-enacted during 2012
- Changes to UK regulation will be broadly positive for the sector
- An EU competition review may limit P&I reinsurance capabilities, further hardening the market
'Global political and environmental factors are impacting the UK marine market
- The melting of Arctic ice will give underwriters two untested shipping routes
- A drive for efficiency and reducing environmental impacts is changing vessels' risk profiles
'Renewable offshore energy has the potential for strong income increases
- Traditional offshore energy is valuable but is in long-term decline
- The world will look to the UK as the leader in renewable offshore energy and offshore insurance
- Offshore renewable energy is a relatively untested risk
- Offshore energy technology is evolving and will gradually reduce offshore hazards
- Offshore renewables offer a unique set of new risks
'Cargo insurance remains soft due primarily to a commoditized market
- Introduction
- Low cargo volumes and containerization have reduced differentiation in policy cover
- Containerization and commoditization mean cargo rates have remained stable
- An increased stockpiling of cargo is giving insurers an opportunity to increase cargo rates
- Increases in hydrocarbon imports are giving a means to differentiate cover
- Solvency II regulation is requiring cargo underwriters to price their reserves more accurately
'The hull and machinery sector continues to operate with soft rates
- Introduction
- Low CORs during 2007'10 have attracted competition to the market
- A hardening in the reinsurance market is not expected to have a material impact on hull rates
- The falling cost of repairing vessels has reduced pressure on claims expenses
- Large claims can impact the market heavily and have the potential to harden the market with one incident
- The average cost per claim for fires and explosions has increased sharply
'The P&I market has hardened slightly in response to global events
- Introduction
- The P&I market structure allows for a wide spread of liability risk
- Increases in P&I premiums have been minimal from 2010 onwards
- Pollution is leading to an adverse claims environment, pushing rates up
- Personal injuries and marine deaths continue to drive claims expenses
- Responses to piracy are requiring increased P&I cover
'The pleasure craft sector remains stable
- Pleasure craft account for more than 75% of UK inland craft
- Pleasure craft have limited penetration among UK consumers
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- Low consumer confidence is limiting premium growth
DISTRIBUTION DYNAMICS
'Introduction
'Brokers remain the most popular distribution method
- Brokers account for 80% of MAT premiums
- Brokers play an important role in placing pleasure craft cover
- Larger brokers are more likely to provide marine cover
- Brokers value low price and good cover when choosing marine insurers
- Aviva is the most popular broker choice for marine risks
- Pleasure craft brokers use local relationships to distribute marine insurance
- Brokers target pleasure craft and SME owners via online and press marketing
COMPETITIVE DYNAMICS
'Introduction
- Berkshire Hathaway, ACE, and Torus saw strong growth during 2010
- Lancashire Holdings has rapidly increased its GWP
- RSA achieved a profitable COR supported by low administrative expenses
- Torus is expanding rapidly
- ACE has grown aggressively and will be looking for acquisition opportunities in 2012
- The makeup of the top five insurers by line suggests that each product requires a distinct approach
FUTURE DECODED
'Introduction
'The marine market will experience weak growth as the market remains soft
- Profitable CORs and a troubled underlying market will keep premiums from hardening
- Brokers expect marine premiums to remain stable during 2012
- Offshore energy will have mixed fortunes over the next five years
- Cargo insurance will remain commoditized
- Hull and machinery premiums will be supported by a fall in claims costs
- P&I premiums will benefit from a return to growth but may be constrained by geopolitical events
APPENDIX
'Sources
'Ask the analyst
'Disclaimer
TABLES
'Table: Marine insurance breakdown by market (£000s), 2006'10
'Table: UK marine market performance ratios (%), 2007'10
'Table: London market premium breakdown (%), 2006'10
'Table: London market GWP breakdown (£000s), 2006'10
'Table: Number of UK-owned trading vessels over 500 gross tons by volume, 1999'2009
'Table: UK and crown dependency registered trading vessels over 500 gross tons (1,000 tons), 1999'2009
'Table: UK marine revenue by source (£m), 2000'10
'Table: Estimated potential generating capacity, 2010 onwards (MW)
'Table: Global average claims cost by type of peril (£000s), 2000'10
'Table: UK marine deaths by vessel type, 1999'2010
'Table: Distribution of MAT insurance (%), 2000'10
'Table: Brokers distributing marine insurance by premium income (%), 2011
'Table: Brokers' top 10 choices for placing marine cover, 2011
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'Table: Marine insurance advertising spend (£), 2011
'Table: Marine GWP and market share by company, 2009'10
'Table: Top 10 UK marine insurance groups' performance ratios (%), 2010
'Table: Top five London market insurers by GWP (£000s), 2010
'Table: UK marine GWP forecasts, 2010'15f
'Table: Key variables impacting the UK marine insurance market, 2011'15f
FIGURES
'Figure: Marine premiums have recovered to and passed pre-recession levels
'Figure: Profitable CORs are likely to attract competition
'Figure: Cross-trades account for the largest single proportion of the UK's marine revenue
'Figure: Most of the top 10 were able to increase market share
'Figure: Incremental GWP growth will be a result of low increases in shipping volumes
'Figure: Marine premiums have recovered to and passed pre-recession levels
'Figure: Profitable CORs are likely to attract competition
'Figure: Energy, cargo, and hull together account for 90% of London market premiums
'Figure: Energy premiums were hardest hit by the recession
'Figure: Growing shipping volumes have kept cargo costs low
'Figure: Container shipping has led to an increase in UK-flagged vessels
'Figure: Cross-trades account for the majority of the UK's marine revenue
'Figure: Maersk Triple E ships are part of a continuing trend for ever larger vessels
'Figure: The UK has the potential to lead offshore renewable growth
'Figure: A drop in shipping income is keeping cargo rates steady
'Figure: The cost of fire and explosion claims has increased from 2007 onwards
'Figure: A broad spread of risk allows P&I clubs to insure large risks
'Figure: Flooding and bad weather in 2007 caused a spike in marine deaths
'Figure: Private pleasure craft make up the majority of UK inland craft
'Figure: Brokers account for the majority of MAT GWP distribution
'Figure: Many smaller brokers do not distribute marine cover
'Figure: Price and level of cover determine where brokers place cover
'Figure: Brokers account for the majority of marine insurance spending
'Figure: Most of the top 10 were able to increase market share
'Figure: Lancashire and RSA achieved profitable CORs
'Figure: WR Berkley's large loss ratio pushed its COR above 100%
'Figure: Incremental GWP growth will be a result of low increases in shipping volumes
'Figure: The largest proportion of brokers expect no change to premiums during 2012
'Figure: Offshore energy premium growth is dependent on government support
'Figure: Cargo premiums are dependent on world trade
'Figure: The global recovery will be the main driver of hull premium increases
'Figure: P&I premiums will be challenged by political and economic conditions
Companies mentioned
Admiral Group plc, AXA, CMS Energy Corporation, Hutchison 3G UK Limited, Hutchison Whampoa Limited, Informa plc,
IntercontinentalExchange, Inc, Randstad Holding nv
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