Holding the aces

Ports and terminals will continue to have a wide choice of insurers Ports and terminals will continue to have a wide choice of insurers

In this era of inflation, there is one price that is largely immune from unpleasant shocks: insurance premiums for business risk.

As in recent years, there is substantial capacity in the insurance and reinsurance markets for many lines, which include port and terminal risks, where tariffs are likely to remain flat.

While pleasing for buyers, this is worrying for insurance carriers, many of whom have been hit by 12 months of pay-outs for natural catastrophes, ranging from earthquakes in Chile and New Zealand, to flooding in Australia and elsewhere.

The main reinsurers are said to be over-capitalised by $19bn, according to calculations by reinsurance brokerage Guy Carpenter, which makes it difficult for them to put pressure on the direct insurers.

Rates in the property and casualty sector as a whole thus softened in the January 2010 renewals, which suggests that insurers will be hard put to win any rise in premiums in April and other points of the year at which many port organisations incept their new annual contracts. 

Insurers will in particular be seeking dearer premiums from clients with port assets located in catastrophe-prone areas, but any rate hardening there could prove short-lived, if the very brief rates spike following the Deepwater Horizon disaster is anything to go by. In that instance, although some underwriters declined to quote for similar risks, there remained plenty of others to compete for business.

The fall-out is likely to be within the insurance market itself, rather than an imposition of extra costs on clients in marine and comparable sectors.

This is expected to be another year of takeovers. Efforts to cut overheads will drive consolidation among carriers and brokers alike. Equally relevant will be the scale of the natural catastrophes, which underlines that primary insurers, as well as reinsurers need to have recourse to considerable reserves, especially in response to the tough demands of Solvency II. Many carriers have been releasing reserves to boost their financial figures, which will leave them exposed to predators.

For risk management executives managing ports and terminals, the important point is that even after any conceivable consolidations, they will continue to have a wide choice of individual insurers and combinations thereof, with providers based at Lloyd’s, in the London company market, in local markets around the world, and in the mutual sector. 

Clients can, as this column has argued for some time, count themselves fortunate in having ready access to the cream of insurance professionals.


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