Cargo insurers continue to get claims from shippers whose containerized shipments were damaged or ruined by Hurricane Sandy. But these claims, coming on top of a record year for marine insurance claims, may cause a flattening of the overcapacity in the insurance market that has led to steep declines in premiums over the last few years.
“I’m still getting calls from shippers who just opened up their containers and discovered their cargo is all wet from Hurricane Sandy,” said John Barnwell. “It’s not surprising when their container was at the bottom of a stack in Port Newark on Oct. 29th and the surge inundated the bottom layer.”
Barnwell, who is global marine product leader for Allianz Global Corporate & Specialty, was reflecting on the impact of the monster storm that hit the Port of New York and New Jersey on Oct. 29 last year and caused extensive damage to terminals, containers and their cargo. “Lots of cars, too,” he said.
The Sandy claims, together with claims for cargo damaged by tornadoes, storms and other natural disasters last year, are still working their way through the market, but one early indication is that they may slow the decline in cargo and liability insurance premiums that shippers have enjoyed in recent years.
“The market is stabilizing a bit,” said Daniel C. Negron, vice president of the TT Club, Thomas Miller Americas. “l am not suggesting premiums are going up, but they are not decreasing the way they did.” He said the end of the decline in premiums on liability insurance has meant the TT Club has retained many clients that might have shopped for lower rates in the past.
“Even now in February, it’s still early days, it’s still not clear how Sandy will be felt in the direct insurance marketplace, although we have paid some claims,” said Paul Friel, cargo leader for the Northeast at the insurance brokerage Marsh USA. He said that in the reinsurance markets, the claims from Sandy are putting heavy pressures on primary insurers to either retain the insurance business of their cargo shippers or to increase premiums to cover the rising cost of laying off cargo risks with reinsurers.
“Some primary insurers have pretty low retentions (of risk) with their reinsurance placements so they are ceding a lot of the risk to the reinsurance markets, which is taking a lot of pain from these catastrophic losses,” Friel said. “Primary insurers are either going to have to restructure their reinsurance policies to take an increased risk retention, or they’ll have to pay more reinsurance premiums.”