Lloyd’s decision to withdraw from the poorest 10% of its business has impacted marine and cargo classes

The withdrawal of capacity from the UK marine market has left brokers struggling to place some risks and others left to tell clients their current long-term deals have simply been torn up.

Lloyd’s decision to withdraw from the poorest 10% of its business has impacted marine and cargo classes. That withdrawal has been accompanied by some high profile reductions in marine capacity from the company markets.

Talk at the Biba Conference in Manchester was of a high profile underwriter looking to terminate three year contracts early in order to increase premiums by 10%-15%.

Stephen Smyth, head of UK regional marine at Beazley told Insurance Times: “The market is in an interesting place at the moment. The decision by Lloyd’s to change their approach to certain risks, which include cargo and marine, has impacted the market.

“We have also seen other long-established insurers withdraw or reduce their capacity in the market. It has impacted upon rates and we are seeing premiums increase. However, this is against a background of the past ten years where rates have been static at best.”

Broker concern

Gerry Sheehy chief executive of speciality MGA, Fiducia, said brokers were becoming increasingly concerned.

“We have been getting a significant increase in calls over recent weeks from brokers who have found their current capacity provider is reducing their participation on marine and cargo risks,” he told Insurance Times.

“Others have said three-year insurance contracts are being terminated and the underwriter is pushing to increase prices by up to 15%.”

Smyth said: “Brokers are looking for stability and consistency from the marine insurers which is what we are trying to deliver. We have seen risks that last year brokers would have had no problem placing now struggling to find capacity.”

He added: “Recent months have seen some high profile underwriters look to reduce capacity for some risks. The results of recent years tell their own story.

“We had record levels of UK exports last year coupled with an influx in imports as companies were looking to increase their stockpiles of certain goods given the uncertainty around Brexit.

“However while business levels increased the premium income didn’t which highlights the issues the market has had when it comes to delivering premium rises.”

Penalising clients

Sheehy said the market’s efforts to drive premiums were penalising clients with clean claims records.

“It is difficult for a client who has a good claims record to understand why his premiums have increased,” he explained. “We cannot penalise clients with good records and brokers need to work with underwriters to find solutions.”

One regional broker told Insurance Times; “The loss of capacity is beginning to bite. We have had to have some tough conversations with underwriters who are cutting back and have become a lot more selective on what they will and will not write.

“Clients who have been with the same insurer for many years now have to find a new home for their risks and the underwriters are not willing to consider risks which come with any claims history. MGAs are being more competitive but we are being asked by clients whether their new insurer will be around for the long term.”

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