Insurers See Ongoing Positive Market Development

25 June 2024- Cargo premiums have been trending upward for the past few years, but this does not mean cargo underwriters are in the clear. According to the International Union of Marine Insurance (IUMI), several headwinds are likely to impact cargo underwriters in future IUMI’s analysis of cargo premiums reported a global premium base of $20.5 billion for 2022 (the last available statistics) representing an 8.3% increase on the previous year and demonstrating positive market development over a number of consecutive years.

All regions experienced growth, except Asia, and this was likely due to economic conditions in a number of that region’s countries, plus a weakening of certain Asian currencies against the US dollar. Despite this positivity, uncertainty prevails.

According to IUMI’s Isabelle Therrien, the cargo insurance market in 2022 found itself at the intersection of economic, geopolitical and sector-specific headwinds. “There were a number of key developments that made their presence known last year and which will continue to exert an influence in 2023 and beyond. In the main, the cargo insurance market follows the fortunes of global trade, albeit with a time lag. Covid put the brakes on trade but this was followed by a strong rebound.

However, there is much uncertainty about future economic growth and this will impact on the performance of our sector.” At a macroeconomic level, the future of cargo insurance will be impacted by a general deceleration of global economic growth and the activity of central banks aggressively battling inflation. This is likely to herald a reduction in trade volumes worldwide.

Coupled with this, a deepening geopolitical fragmentation is further complicating world trade dynamics which will, inevitably, present new challenges for underwriters. Since Covid, supply chains seem to have recovered and freight costs have eased, but some trade routes are beginning to evolve and take on a different shape post-Covid.

“There have been definite signs of recovery and resilience in the sector but cargo underwriters are having to grapple with issues such as inflation directly impacting the value of goods transported, and, consequently, the value of associated claims,” she said.

Ongoing geopolitical tensions continue to contribute to ongoing unpredictability in supply chains and the possibility of disruption remains. According to IUMI, there has also been an increase in natural catastrophes that have brought on major claims for underwriters. IUMI is set to release statistics for 2023 in September this year. Source: Freight News