Stormy weather fails to dampen prospects
Hurricane Ernesto, Typhoon Haikui, Typhoon Damrey, Typhoon Saola. That grim quartet struck in the space of just a few days of August, bringing destruction to parts of Central America in the first instance, and heavy flooding in the Far East in the rest. Earlier in the year, tornadoes brought havoc – 600 of them in the first three months of 2012, causing insured damage of $1bn-plus.
Despite all this mayhem, the year to date was, at the time of writing, being seen as a relatively calm start for the loss book – at least compared with 2011 when the Japanese tsunami, New Zealand earthquakes and floods in Thailand hit the global insurance market for $58bn.
The market will comfortably be able to handle this year’s crop of catastrophes, it seems, which – getting down to the impact on the majority of insureds – will militate against any move to increase premiums. This remains so even if we narrow things down to the marine sector, which surely is having a hard time: the year began badly with the Costa Concordia calamity which is forecast to ring up a $1bn claims bill, and the repercussions of the grounding of the containership Rena in October 2011 on a reef 14 miles from Tauranga Harbour, New Zealand, may yet cost the market $300m.
The good news for port and terminal operators is that insurers are not turning their backs on their needs – which means that there is enough insurance capacity to allow renewals at close to last-done rates. The exception will be ports deemed to be in storm-prone areas. Such ports cannot change their address, so they may have to live with being aligned to the general market trend at present for uplifts in premiums of around 3%. It is further worth remembering that persistent low interest rates are preventing insurers from gaining the returns on investment that they would like.
Brokers will certainly be reminding underwriters that their industry clients are struggling to keep costs under control, as the weak trade growth forecast in many regions continues to dampen the outlook for throughput volume. Nor are ports immune from disruptions in far-away places: natural catastrophes at the other end of global supply chain constitute risks that are very hard to manage.
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