Before the Costa Concordia hit the rocks off the coast of Giglio Island, in Italy, the maritime insurance business was struggling to survive. Now, apparently, the future seems a little brighter. The event involving the biggest Italian cruise operator came to modify the insurance business scenario in more than a way.
For the direct insurers it means a relief because it will raise the fees paid to them by the final users (vessel owners, charterers or operators) at a time when they were charging just enough to survive. The competence between an increasing number of players in the market, added to a better safety record and the absence of great disasters in the industry made premiums drop smoothly but steadily over the last decade. Now, just ahead of the annual policy renovation season, we are all reminded of the uncertainty that rules the maritime business.
Not that we had not seen the Rena. But it´s impact was just a jiggle compared with the huge amounts that Costa Cruises (and it´s insurers) will face in the near future. Over four thousand personal compensations for injured, either physically or psychologically, plus the dozens of dead, will pile up over the already giant costs of environmental cleaning and wreck removal.
Here is where the Mamushka doll of the maritime activity shows the face of yet another victim: the reassurance industry. The companies that insure the insurer have suffered a terrible 2011: the Japan and New Zealand earthquakes, the Australia and Thailand floods and other catastrophes took their toll, around 335 billion dollars, and the industry was looking forward to a 2012 of relief. Bad luck.
So, what we are seeing now is a fight between the pressure of the market competence between insurers, that pushes the prices down, and the upward pressure of the latest events. The results are still to be seen, but most forecasters in London predict moderate rises in general, with liability coverage prices rising more sharply than the rest. The impact of that cost raise to vessel operators is also likely to impact prices, but at the same time the cruise industry feels the need to push prices down to recover market share and fight customer fear.
One thing is certain in this scenario: there will be movement, and winners and losers will be determined by the player´s ability to react, adapt to new market conditions and withstand the storm.