Page 63: of Maritime Logistics Professional Magazine (Q2 2012)

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MarPro sources advise us that the biggest part of marine underwriting is recreational marine, so even the seemingly robust numbers depicted in the top 25 do not necessarily mean that an underwriter has a big part of the commercial marine market. It’s hard to know how much. A.M. Best reports that, as annual trend, direct premiums written declined by 1.9% from 2009 to 2010.

Looking at the overall economy itself and a tough couple of years on the waterfront, this could be a function of less cargo being moved and fewer ships on the water.

The adjusted loss ratios are worth looking at. As a general rule, our source tells us that in the marine market, a 60 percent ratio represents break-even business in the marine markets. This takes into consideration acquisition costs, commissions, salaries, keeping the lights on, reinsurance, etc. And, he adds, “No one can underwrite to break-even and expect to make money.” The higher loss ratios could represent any number of variables, including but not limited to those working on much smaller margins in a soft market with too many players. At the end of the day, it may be too diffi cult right now to get rates up to where they should be.

According to our source, “Those showing loss rations over 60 should be concerned over whether they have adequate pricing or good selection of tonnage or cargo risks.” That said; the industry average for marine underwriters shows a cumulative Ad- justed Loss Ratio of about 52 percent, perhaps indicative of a nominally healthy business sector. Beyond this, that cumulative ratio, since 2008, has improved from 68.4 percent. Is industry getting safer in the interim, insurers getting choosier or perhaps is it a combination of the two? In this highly complicated and secretive business, your guess is as good as ours. www.maritimeprofessional.com | Maritime Professional | 63

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