Best’s News & Research Service - October 23, 2017 10:06 AM (EDT)
Best’s Special Report: U.S. Inland Marine Industry Continues to Show a Knack for Profits
- October 23, 2017 10:06 AM (EDT)
Oldwick //BestWire// - The inland marine insurance industry has been one of the most profitable and consistent lines of business in the U.S. property/casualty (P/C) industry over the past decade, mainly due to greater diversification compared with other property lines, thus mitigating the overall effects of any one event, according to a new A.M. Best special report.
The Best’s Special Report, titled, “Inland Marine: Unique Risks and a Knack for Profits,” states that the inland marine sector’s combined ratio has a strong positive correlation with the other major property lines – commercial multi-peril, fire and allied lines and homeowners/farmowners. However, the segment has not experienced the same peaks and valleys as these lines, and is the only one of these lines not to report an underwriting loss since 2006. Except for the catastrophe-impacted years, combined ratios have remained under 90.0 during this time period. A.M. Best expects results in 2017 to deteriorate compared with 2016 owing to Hurricanes Harvey and Irma and decreasing rates, but believes inland marine insurers will still post underwriting profits. Inland marine insurance accounted for approximately 2.1% of total P/C net premiums written (NPW) in 2016, totaling nearly $11.4 billion, a slight decrease of $15.6 million from 2015. The NPW decrease was the industry’s first since 2010, and was due to overall rate decreases and an increase in risk transfer to reinsurers. Two of the largest risks covered under inland marine are cargo in transit and property under construction, as well as the equipment used for that construction. Both have recovered from the financial crisis; however, the economic growth in construction and freight is providing opportunities for new entrants, resulting in lower rates and tightened margins. Given the variety of risks covered under this line of business, no one insurer can be an expert in every risk, allowing niche inland marine insurers to hold meaningful shares of the market.
An increase in infrastructure-related construction projects and a greater role from technology in the planning, implementation and control of the flow and storage of goods will present inland marine writers opportunities to expand their portfolios. Underwriters seeking to capitalize on opportunities in the inland marine market will need to stay abreast of new and evolving exposures and technologies that may affect coverages.
To access a copy of this special report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=267239 .
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