Overview of Marine Insurance in Latin America
On the first formation forum for ALSUM in 2022 I had the opportunity to moderate an expert panel to analyze and comment every point of view about how hull and transportation Insurance market felt during 2021, most precisely about its growth, rates and projections by this 2022.
Originally, taking as a foundation the publications from international organizations such as The World Bank, The International Monetary Fund and even the ALSUM, we analyze if in 2021 where there a market growth for Marine Insurance or is it still recovering from 2020, a year known for the worst economic contraction in the last years, characterized by a massive drop in air and water traffic also in importations and exportations, event that had a strong impact on the World economy by a 21%.
Is remarkable to note that the 2021 PIB was 6% and was not able to recover its fallout of -16% in 2020, nevertheless, the rate had an important increase since the decline of 2020, reversing the trend of the 2019 pandemic.
What happened with Marine in 2021?
Rewarding Marine’s premiums, in 2021, can’t recover from 2020 market deterioration, leaving a net position of -1% if we compared them with 2019. On this comparison between goods premiums, we don’t notice a bullish market, on the contrary, a recovery on tendency on the goods that generate less premiums.
Now on the claim’s topic, in the last years in our region, even without any major catastrophe reported, we can notice an important increase in losses due to theft in storages and highways. From 2020 until early 2021 its noticeable a decrease in the rate for the mentioned claims, with a direct correlation to the decrease on freight movement, since when these movements increase in 2021, it’s noticeable the rise in losses due to theft. The real proportion can be noticed in the upcoming months when the development of the actual data its finished. On this sense, the rate keeps steadily wronging due to anthropic aggravated factors by the pandemic and new logistic trends.
On the field of hulls, the claims dropped, and the insured gets more involved and worried to keep a good state on the ships.
About this topic, we can conclude that, in fact, Marine’s Market in Latin America it’s defined by a recover and not a natural growth, although the relevance on different markets it’s important, less insured on previous occasions, and the plan of current costumers to keep their coverage active, especially on the field of hull. It is important to notice that the trend is not the same on every country on the region, where some have been affected by their currency’s devaluation.
A different factor that affected Marine Insurance on the last year is the present supply chain crisis, known for delayed orders in 2020, a high demand of goods exacerbated in 2021, container shortage, port congestion, increase on navy freight’s and supply chain’s vulnerability. The world is completely different post-COVID and the weaknesses on world’s logistics are now exposed; the recovery and stabilization are still a work on progress, on a best-case scenario the current situation will improve by the end of 2022 and on a worst-case scenario by half of 2023.
On this sense, Marine Insurance is been affected by factors such as increment on risk in ports and boats, like the aggravation on risk for the use of ships not specialized to carry these loads and accomplish the delivery. The growth on electronic commerce has been another topic that the industry can notice, as for the sales medium, the cost of these products and how are they delivered is necessary to think on another kind of insurance and innovate on services that fulfill the need of the customer. Another change that has to be implemented to improve the current state is the opening of regulatory international treaties on the field of insurance because cross-border insurance is still very limited. Is not just the stabilization of the supply chain, but the evolution of the products, having in mind the new behavior for shopping on a world scale and the opening for international regulations that allows the trade between regions.
What is the prospective for 2022?
By 2022, we noticed that, according to projections from the World Bank, the PIB of the region will not recover from the pandemic and the countries will still be affected by factors like devaluation and inflation; nevertheless, is expected a growth in goods. On the field of Marine, to project the behavior or premiums and claims, is necessary to analyze the impact on new risks, such as cybernetic vulnerability, the social ruptures of the region, the unbalanced economic recovery, climate changes, and geopolitical tensions.
In the hull line, it is expected the decrease in claims and when the capacity of the market with the existing members recovers, it is expected a moderate growth on the value of premiums. While on Loads, the growth will be correlated to the regional and global economic reactivation and the accessibility for purchases for products for insurance of transportation for PYMES and for the entire E-Commerce industry. The rate on claims can be visualized as an upward trend and with new risks that promise to keep evolving the world supply chain.
This 2022 is set to be a year with uncertainty for the Insurance Industry of Marine, leaving the challenge to implement the best possible professional practices to help on the recovery for the world economy and this new post-pandemic reality.
I thank Sergio Florez, from Praam; Esaú Mendoza, from SafeLink Marine; and Neil Bath, from Willis Towers Watson; panelist of the forum whose contributions I gather on this blog.
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