NMU buoyant as the tide turns in the Cargo market

Authored by Guy Smith, NMU Cargo & Freight Underwriting Manager

Until 2018 the Cargo market had seen one of the longest periods of falling prices in living memory. After successive years of Cargo making a significant loss in Lloyd’s of London, they took action in 2018 reviewing Cargo as a decile 10 class.

Following the review, a number of Lloyd’s syndicates took the decision to cease writing Cargo. The business plans of those wishing to continue were subject to close scrutiny by Lloyd’s and many were agreed but with reduced capacity.

The uncertainty in the Cargo market is still apparent, as many other insurers are seeking a combination of rate rises with remedial action on portfolios, or simply exiting areas of Cargo altogether.

This exit of capacity from the London Cargo market has undoubtedly been a key driver in the hardening market environment for Cargo, which, for many underwriters and brokers is the first such upturn in the market cycle they will have experienced.

However, the change in market conditions does present opportunities for some.

The current lack of available capacity and market uncertainty in Lloyd’s, that could potentially impact the traditional MGA models operating under binders via the Lloyd’s platform, is not an issue we have to contend with.

Here at NMU, we’ve definitely seen an upturn in the number of opportunities on the Cargo side in 2019/2020. The reduced capacity within Cargo, both in London & the UK Regional markets, has played its part. But brokers and clients are also seeking comfort and certainty that the insurers they are working with will still be there in 5/10 years’ time. NMU have been a specialist insurer in this line of business since 1982 and whilst we have diversified in terms of the products we offer, Cargo is still our core line of business. Over the years, we have recruited, trained and retained the very best of underwriting and claims talent in the Cargo space, winning numerous awards for our proposition and service.

These skills have become even more valuable as brokers and clients need to find long term, sustainable solutions for Cargo risk placements.

The poor results in the Cargo market in recent times has resulted from years of depressed rating and an increase in loss severity, greatly increasing the average claims cost. The higher severity is largely driven by the increase in stock volumes insured under stock throughput policies, meaning the market as a whole suffers more significant losses from fire, CAT risks and flood. Larger container vessels carrying up to 18,000 TEU’s also present a far higher concentration of risk exposed to a single event. We, at NMU, have the critical mass we need in terms of income from Cargo to weather the larger losses, and by holding our discipline through the downward cycle, find ourselves in a strong position. Of course, we always review our pricing and risk appetite, as this is just good business practice; however, this allows us to take a sensible and measured approach to addressing any areas we feel need attention, and this provides the consistency that brokers and clients are increasingly looking for.

Managed by Munich Re Specialty Group Limited (MRSG), NMU is part of its international distribution companies. MRSG also leads the Group in which Munich Re Syndicate Limited manages Syndicate 457 at Lloyd’s. Whilst our capacity for Cargo is provided in the form of a Lloyd’s Binder, 100% of the capacity for NMU is provided by Munich Re Syndicate Limited. This means that the current lack of available capacity and market uncertainty in Lloyd’s, that could potentially impact the traditional MGA models operating under binders via the Lloyd’s platform, is not an issue we have to contend with.

Our broker partners can be reassured that we are here to stay in the Cargo market and it is very much business as usual for NMU.

The focus on underwriting excellence that has put NMU in this favourable position flows from the overall ethos of Munich Re Syndicate Ltd, which, through delivery of excellent underwriting results has gained ‘light touch’ status from Lloyd’s. This has meant that NMU have the strength and capacity required at a time our brokers and clients need it most.

We pioneered the Lloyd’s Service Company business model, and while many of our competitors have reduced their local presence, we have continued to maintain our regional network.

Our broker partners can be reassured that we are here to stay in the Cargo market and it is very much business as usual for NMU. Our range of specialist products, comprising cargo, freight liabilities, engineering lines, marine equipment, terrorism & sabotage, motorsport and cyber – will continue to be serviced by NMU’s team of award-winning underwriters, based in offices across the UK.

2020 promises to be an exciting year for NMU as we continue to develop and expand our product range, so don’t forget to subscribe to our email distribution lists to be the first to hear about our news.

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