In recent years rates in marine insurance and, in fact, the insurance market as a whole, have continued to drop dramatically. Insurance expert Tom Montgomery takes a look at what’s been happening.
THE DROP IN INSURANCE RATES IS GOOD news for the owners’ representatives, family offices and yacht management companies, who can show their owners a genuine saving year on year. Obviously, they will want to be praised for their stunning bargaining power, however the main credit, sadly for those who work in insurance, is due to the continuing soft market conditions. For example, a 100m+ yacht that in 2015 was on cover for $1.25m by 2017 is now on cover for $560,000 and the value of the vessel hasn’t dipped.
What are the reasons for this?
The insurance market has had no major losses, and therefore hasn’t had any major payouts that would have caused insurers to hike up prices with the result that there is currently still enough profit in the premiums, without being greedy.
With a lack of organic growth through rate rises, insurance companies have become fiercely competitive and are willing to drop their rates and commissions to hold onto the business or win it, sometimes even at a loss. Retention of clients is everything! There are also new market entrants which increases competition and further drive down prices across all lines of business. Many investors enter the UK market because it is seen as a safe place to base their capital, compared to some of the more economically fragile European economies, where they’re exposed to sovereign debt issues. However, this might will surely all change with Brexit.
Pension funds are investing more in insurance due to the safe risk that complement their portfolios, resulting in even more capital pouring into the market.
Is the market going to change?
You can read up to 3 premium stories before you subscribe to Magzter GOLD
Log in, if you are already a subscriber
Get unlimited access to thousands of curated premium stories, newspapers and 5,000+ magazines
READ THE ENTIRE ISSUE