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Increases in construction spending and the transport of goods have led to a near doubling of inland marine insurance premiums in the last decade, with direct premiums written totaling $24.5 billion in 2018, up from $13.3 billion in 2009, rating agency A.M. Best Inc. said in a report Tuesday.
Year-over-year premium growth also exceeded 8% in three of the last five years, as economic growth fueled both construction and freight activity, boosting demand for inland marine coverage, Best said in the report.
However, claims arising from catastrophic fires in major metropolitan areas and water damage claims have led to adverse loss experience and are “a key issue” affecting the market, Best said.
“One downside to the growth in the number of larger construction projects during the economic expansion of the last decade has been the proliferation of these types of losses,” Best said in the report.
The impact has been felt acutely by insurers writing builder’s risk exposures and by construction underwriters in general, Best said.
Another factor is the entry of new players in the market, which has intensified competition and caused rates to decline and that “could constrict profit margins over the long term,” Best said.
The property/casualty industry has been more successful underwriting and pricing risks in the marine segment, with a 20 percentage-point advantage in the loss and loss-adjustment expenses ratio than in its overall portfolio, Best said.
“Since 2012, the highest combined ratio in the segment has been 89.9 (in 2017), which is indicative of strong profitability,” Best said in its report Economic Growth and Specialization Bolstering Inland Marine Expansion.
Berkley Program Specialists, a unit of W.R. Berkley Corp., said Thursday that it had joined with managing general agent Specialty Program Solutions to create a new inland marine program aimed at helping protect mobile equipment and machinery used by logging, lumbering and construction companies in the Southeast.