Sandy Losses Wiped Out Entire U.S. Marine Premiums for 2012: IUMI

March 22, 2013

The cost of Superstom Sandy to the global marine market has been put at between $2.5 billion and $3 billion — which effectively wipes out the entire U.S. marine premiums for 2012, according to the annual spring statistics issued by the International Union of Marine Insurance (IUMI).

The IUMI said its statistics — which cover the cargo, ocean hull and offshore energy sectors — remain a litmus test for the marine insurance market and “the impact of Sandy will define 2012 in the eyes of the underwriters.”

“The largest story to tell about the cargo market is the impact of Superstorm Sandy that hit the U.S. east coast on Oct. 29, 2012,” the Hamburg, Germany-based organization said. “The storm’s main areas of impact were the states of New York/New Jersey. However, it was one of the largest storms ever in terms of size, as its impact stretched over 1,000 miles from the Great Lakes to Boston.”

And while it’s still unclear how much of the Sandy-related marine market losses were for ocean cargo, “we do know that major industry groups such as automotive, coffee/cocoa trade and fine arts were particularly hard hit. There is also a substantial inland marine loss as well,” the IUMI said.

The IUMI also commented that in the ocean hull class, the loss of the Costa Concordia was “the biggest event in a year where the level of losses remained at concerning levels.”

In the offshore drilling industry, more new rigs came into service in 2012 — with a further increase expected this year. The figures show 36 new builds were delivered in 2012, with 74 new builds are scheduled to be delivered in 2013, the IUMI said.

“Some severe major losses hit several lines of marine insurance business in 2012,” IUMI’s president Ole Wikborg said.

“Although the claim frequency and cost are beyond our control, we’re going to do our part to turn it for the better in 2013. Hence we’ve chosen for IUMI’s 2013 conference in London in September the common theme ‘Building resilience — defining for a sustainable future.'”

The organization said the frequency of total hull losses increased marginally in 2012 compared to preceding years, now standing at 0.18 percent of the world fleet. The tonnage lost has not increased, however. Total losses for both tankers and bulkers continued to be low relative to the world fleet, or below 0.1 percent of the fleet.

The IUMI said weather continues to be the major cause of the total losses, representing 50 percent of the vessels lost between 2008 and 2012. Grounding is the second most frequent cause, accounting for 25 percent of the cases.

On a brighter note, the IUMI said that world trade continues to strengthen from its low point in 2009. “Clearly world trade volumes have a direct impact on cargo premiums which has started to increase again following the downturn during the financial crisis beginning in 2007,” the IUMI said. The association said major economies such as the U.S. and China continue to show positive GDP in both the short and long term, while Europe should start to show growth in 2013 and beyond.