Kathmandu. The marine insurance sector is currently at a critical juncture. The struggle between soft pricing and surplus capacity on the one hand, and war and geopolitical instability on the other, are increasingly making the balance between premiums and profits increasingly uncertain.
Recent data suggests that even a modest increase in current premiums is not guaranteed. As a result, changes in policies, marketing strategies, and risk management are the need of the hour.
While global premiums have risen normally, rising fleet prices have led to a concentration of risk. Such concentrated risk can put the entire industry at risk in the event of a major loss.
In addition, fires and explosions seem to be the most expensive claims. Whereas cargo damage is the most frequent. Inflation is driving up the cost of insurance claims. This is putting a strain on the financial capacity of P&I clubs and other mutual organizations. In such a case, simply increasing the premium is not enough; More stringent risk control and security protocols are required.
Geopolitical instability, especially in regions such as the Red Sea and Ukraine, is bringing about significant changes in maritime trade routes and costs. This has increased the demand for war risk coverage and political risk products.
According to experts, P&I clubs may be forced to operate at a near-parity rate in the next fiscal year. This means that the revaluation of premiums in the market is almost inevitable.
In such a terrible situation, the market is not stable. Brokers are introducing new products such as Willis’ ‘Undercover’ feature. This can protect the owners from geopolitical risks. However, at the same time, the aggressive entry of new players is increasing the competition. That could create additional supply and prolong the softening of the market.
The marine insurance sector is no longer just a financial challenge, but it is also becoming increasingly politically and strategically relevant. Route changes are driving up logistics costs. Combining aging aging ships with new fuel-transportation requirements is making the risks more multidimensional. Therefore, in addition to increasing premiums, dynamic pricing, technology-based risk identification and effective supervision are also needed.
The sustainable future of the marine insurance sector requires investments in risk mitigation, route-based pricing, information sharing, and efficient capital management. The industry needs to take strategic action immediately. Otherwise, a soft market in the long run can have a serious impact on profits.
