UNCHARTED WATERS Marine insurance may not have changed muchin principle, but as Ben Abbott finds, the modern client is driving commoditisation and competition is likely to see some insurers stay the course - and others haul anchor Oceanic Marine Risks managing director Maria Dwyer has seen many changes to the marine insurance broking business in recent decades, since the business was founded in 1986. ‘With offices in North Queensland and Brisbane offering specialty broking services in commercial hull and marine liabilities, Dwyer has recently benefited from a buoyant period in her market niche in the region, and seen fairly consistent rates for clients at renewal “This may be because the commercial tonnage in Australia has increased because of the oil and gas projects in Gladstone and the North West Shelf WA. Like any other commodity, the supply and demand relationship holds up?” Dwyer says, However, things are set to change for her business in the near future, Given much of the oil and gas work has been completed, Dwyer is expecting commercial fleets to reduce their vessel ‘numbers over the next 12 months, and this has already started to some degree. “As a broker who has enjoyed growth in this time due tothe oil and gas projects, we are mindful that_many of our clients will probably be downsizingin the near future,” she said. ‘Surprisingly, this is not che greatest challenge Dwyer’s business is facing. Instead - just ike many other segments ofthe broader insurance market ~ it is commoditisation she is watching, pushed by the fast-changing expectations and demand of the ‘modern client. ‘Dwyer’s experience reflects trendsin the marine insurance sector more broadly, where both brokers and insurers are feeling the powerful currents of a ‘number of market dynamics. With ample capacity chasing business and strong competition from insurers and agencies ~ as well as the forces of. ‘commoditisation encroaching on new areas of the ‘market - brokers and product providers alike are having to find their way in uncharted waters. ‘THE COMMODITISATION WAVE Some products in the marine sector have been commoditised for some time, with small transit cargo in particular a vanilla risk lo domain of electronic platforms. The SME marine insurance market is also fast becoming commoditised, while the pleasure eraft segment is since the “The commoditisation process will probably mean less jobs in the marine insurance industry as it improves efficiencies, reduces duplication and streamlines processes” Maria Dwyer, Oceanic Risks boswng to the same teh-driven trend However brokers are asking the question - why ‘would this rend stop theret "We can se that eango has been commoditsed for years and marine libiites are going that way as we speak, so next it will probably commercial, hl? Diver save ‘Commercial lt A high al, complex risk, ‘commercial hull has always been ecen by most — inclading Daryer - a a strong lst bastion? aginst ‘commoditsaton’ advance While cht is stil the ease, how much longer willitstand?“1f yout said ive years ago you could ccommositie marine labile, I vould have been sceptical. But we are. So why not the rest? Our clicns are dictating our approach, and we have to Tsten to them” Duyer sys Suncorp Commercial Insurance national manager of marine underwriting, Mark Wiliams, says he has not seen commoditization develop in the commercial hell market ~ though he says this {doesnot mean it couldnt happen. Factors that count aginst, however, include the sizeof the market segment, he small namber of liens, andthe subsequent cost effectiveness up anu down the supply-chain However, Dwyer says on the broker level, itis alread being conceived, “We ae thinking about it now, it must be? says Dwyer. “We are thinking ahout ways to reduce our workload, ro spend less time inthe office and more time with the client. In amore meaningful way insurers and underwriters feel the same, and are doing the same at their end” The question commodiisation raiscs is, what happens to the insurance talent and jobs? “Our roe i already changing to one of being an integral part of the clients advisory network Duner save. “Unfortunate the commoditistion process wil probably mean less obs inthe marine Insurance industry as it improves efficiencies, reduces duplication and streamlines processes Will commoditistion turn brokers into National underwriting manager of GU Insurance'smarine business, Oliver Miloschewsky says commoditistion is “the biggest question” facing the market over the next Few years “While this clearly drives efficiencies, it also The problems with platforms {arange mere taloredcovercan“save they clet rom date according to Mark Ware Scop Commer calhsrance’snatera manager of maine undewtng, as says becker nee tobe randhdwhen teamestotve ties of murhe exgocovr “Tey [platforms] ae quick convenient ae etectv tol butthey arent rmeanttor camplcatedrsk pfs: Wilams expla. "Thertrnatenalnaure ‘fade wilsometimes ntedice ek element econ or comolance equements.whichony become apparent as krowedge ofthe stipment x tadels ewesigated” He ies the example of many courvies requing that domestic cargo movements be covered by alcalyicensedisure onan adrited poly "ior exarpe. alent exprtngto china andthe goods have competed the expat shipment theymay sti needalcalisurertocover ther or thee ‘Gxgobeig moved wehin China" Wiliams 39, “Aho the poy may ote the abit to caver he goods wl ra <estnaton as partf en expat shipment a partes nedtobe dea on what the al destinations therwisetmay ender te poe ran-conplant wth Gnesi” {lent may so be inreachollcalreguatons thr ron-adited poleybyaerlgn sure doesnt account forthe payment ofiocaltanes andcharges Liew patos tal totabwinto acco theexstece ot embargo nd ‘tad sanctions meaning cents coud break he lw achat becoveredby surance "Recent exarples of counties affecedbysarcions nude sia sedan Willan said "he ctl message ober stabe ask hase ‘bests or tha let Brokers nee to understand exact homther chews Press operating anda oer enteral ences ek aspects ray inuence the overage hey an cba” Wilms conse Y=, > “Marine insurance, 7 N as one of the most international classes of 4a insurance, is often seen as a comparatively easy class to deploy capital and expertise" Oliver Miloschewsley, Though clmate change has opped down the politcal agenda Inausuala ts thebusness of marre sect Maus tokrow ‘thelkethe mate data « Sunderand Marne wbichsesfiaue growthinksbishess coring forthe ice market peseredby the quacitre inaicy moan tote adonatfehngvessetength = Sys ate charge isks ar aka torres, "We have or omnis orups and we motor igs the <limate change very sey” sys Sundeand Mane Aston branch marager hiskerrey. “Wsdeit ante ot eestor us because ot ony des atc. aquaclture,butas the fisieg ie of ings aswel pets gs the wld fish stocks andthe eke oodnganddamogelnareassuch se ans and pots foreample” ‘Wah growchintheshingndsy curenty stat Sundeardseesincreased boushessfowing on te nceased domendtar farmed seafood "The pincpalcawseolosicdsease falowedby enitonmentl contin hat ‘canine tings ental algal los orsimlystrm damage” removes the taining ground for our foture Underwriters and it wil ave a sgaficant impact ‘on succession planning and talent management” hesays “How are we going tain up-and-coming underwriters in an environment where an lectronic platform takes care of all SME business lad a senior underwriter positions the new entry level oe for specialty ine such as marine?" Dur anges commonitnation can be od iit liminates duplications and increases efficiencies, Ibutpronidingcarcer paths for sta wilinereaningly ‘bea challenge. (CURRENTS OF COMPETITION Marine insurance i not immune from the other hallmark tends ofthe eurent market. “Marine insurance, as one of the most International danse of insurance, soften nen asa comparatively easy class to deploy capital and ‘expertog” says CGUS Milschewaky. ‘A. low interest environment and a. till comparatively attractive Australian dollar has led ‘over the last couple of years to a “high degree of fragmentation and abundance of capacity” in ‘arin insurance. Milnchewky 3% ‘Suncorp Mark Willams agrees. “The marine marist has had very high ewe of capacity for sometime, As isthe case with any insurance market with excess capacity, this is resulting in some Insurers severely cutting prices in order to chase marketshare” Miloschewky says some capacity i “purely ‘opportistic”, and that there ix not a lot of lomgsiey i such propositions, or the desire t9 boil and lead the Australian market ‘Williams angucs that cutting prices i having a negative impacton the probity ofuome player, and may lead them to change thie risk appetite tnd ext product clases “The markot has already seen some significant Jinrer eitng certain marine proacts, Wills says "Wellestablshed players with abroad range lof covers and sstanable pricingare best placed t0 ee thro the coming pera of realignment Such conditions arc challenge, as muchas they sreanopportunty *Asamarkst, we need tobe able to offer more than capacity nd, in an environment where more and more operations are moved ‘shore we believe there a need and opportnity for renewed leadership and to capitalise om local expertise and sevice” Miloschewsky says ‘The pattern is much the same in the pleasure craft market. Club Marine CEO Simon MeLean say the business in currently sexing agsremive competition driven by afew new entrant. This will likely have the impact of placing doverward press on pricing inthe soe term ae ewer competitors attempt to establish market share” McLean ss ‘The competition is at times erratic “We are cing real mix of strategie in the markt fom fur competitors, with some withdrawing from certain clase altogether ach answing maven fand older vessel ~ yet others are pricing very agressive nthe same clases” “MeLean says competition, in combination with slack of ianiicant catastrophes over the past 249 1 months, will mean the strong possiblity of a continuation of Tange price variances in some please craft clases, However, he ny tht a ewe Significant events” could change this situation ‘git quickly, especially for those with offshore Club) Marine is focused on long-term sutainabilgy not short-term growth, and our Dricing wil eft this moving forward” Mean says ‘Miloshewaky says what is lacking fm the sggresive push for new busines ie the resourcing to service the nocd of brokers and insted fom an underwriting and claims point of view. FUTURE ASSURED? Tor Occanie Marine Risk’ Dweer, the farure of marine insurance broking will be almost ally ‘shaped by thane she spend her time focused on ~ erties “My fate challenges are not coming from the ‘marine insurance market, they are coming from marine insurance client” ae sys. “Tam not ‘worried about premiums inreaiing Or capacities being reduced. Tam more concerned shout making sure my business model ean enable ‘me to mcct my clients expectations, ierease efficiencies and provide career paths for my staff nd wml grove the Business," she rave. owever, in OGUs view at las, the broker offering is clearly here to stay inthe marine segment "We very much believe tha there will, always be a role for specialist brokers. who tunderstand their clients business and service ‘hem well” sayn Milonchewsby “[The aggressive competition] willlikely have the impact of placing downward pressure on pricing in the short term. as newer competitors attempt to establish market share" ‘Simon McLean lub Marine Over time, the challenge for brokers wil be ‘ensure they continue t0 deliver value to their ‘dient who become more and more tech savy and ‘who have ererinereaning accent 10 insurance ‘soltions driven by commodiisation