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The outlook for the marine market is for continued surplus capacity, although insurers are approaching their business cautiously, say observers.
The current situation will continue for the rest of the year, barring a major hurricane, said Guy Claveloux, New York-based U.S. marine practice leader for Marsh Inc.
Meanwhile, “everybody's holding their breath” with respect to the storm season, said Richard J. Haverlin Jr., managing director at New York-based brokerage Hugh Wood Inc.
Don Harrell, New York-based senior vice president for marine at Liberty International Underwriters, a unit of Liberty Mutual Group Inc., said the industry has been recovering “pretty well from last year's losses” and there is now “a more prudent approach to technical risk underwriting, which is favorable to the industry as a whole.”
Christopher Smith, senior vice president at Bermuda-based Endurance Specialty Holdings Ltd., pointed to the cost of salvaging the Costa Concordia, which he said is affecting several reinsurers.
“There are a finite number of reinsurers” in the marine market, he said. “Reinsurance costs will go up. When reinsurance costs go up, each carrier has to figure out if they can afford to buy as much as before, or buy less and take higher retentions,” he said. Higher retentions lead to more underwriting discipline, he said. Insurers “have to be more selective.”
A recent proliferation of economic and trade sanctions that can apply directly to insurers means that marine insurance companies must undertake detailed due diligence.