Hull committee issues grave warning as rates fail to keep pace
Capital providers are abandoning the hull market, with many leaving by the end of the year, warned Joint Hull Committee (JHC) chairman William Beveridge.
In an interview with Insurance Times, Beveridge, the hull underwriter of XL London Market syndicate, who succeeded Simon Beale as JHC chairman this month, said that unless rates hardened "fairly rapidly" to a profitable level there would be "no reason for capital to stay in the business".
Beveridge said that rates had hardened to a level where underwriters might break even in 2003 "if they were lucky". But he questioned whether this would continue or whether it was the precursor to the market "drowning like a rat".
Marine hull rates have been increasing gradually over the past couple of years, amounting to a composite rise of about 40%. But these have been insufficient to reach profitable levels.
The marine hull market has not made a profit since 1996. Last year the market's global losses amounted to $750m, according to the JHC.
"The worrying thing is that if rates stop increasing then we haven't got enough in the kitty to survive in the market place. The future of the hull market is looking pretty bleak at the moment," said Beveridge.
"The prognosis is that unless rates harden fairly rapidly, the capital base will start asking the question, why after six or seven years of loss and after two or three years of rating increases the hull market hasn't recovered and there is still no profit.
"Capital will leave by the end of the year. There have already been indications of this beginning to start.
"Logic would dictate there is no reason for it to stay in the business."