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Head of Ocean Cargo, Americas, AXA XL

In the 17th century, shipping was a perilous enterprise. Ship owners would gather at Edward Lloyd’s coffee house, where the idea arose to share the financial risks. Owners would post their ship’s name, voyage and cargo on the Lloyd’s wall. Other ship owners who were willing to share the risk wrote their names under the ship’s name. These early underwriters helped launch the entire modern insurance industry

Today’s marine cargo market is far riskier and far more complex than any of those ship owners could ever have imagined. The wider marine insurance market enjoys less regulation and marine underwriters have a great deal of creative latitude when it comes to crafting innovative coverage solutions. But that flexibility also comes with a cost.

For the last 10-15 years, the cargo insurance market has been ’soft,’ a.k.a. a buyers’ market. Plenty of capacity. Competitive pricing. And insurance carriers were offering up lower deductibles and policies with generally favorable, increasingly broader terms. Soft market conditions do not bode well for carriers’ profitability and financial strength, however. This is why, starting in 2019, the cargo insurance market began to change as losses took their toll.

Smoke on the water
Natural catastrophes like Hurricanes Dorian, Harvey, Irma, and Maria, wildfires in the US and Canada, made an impact. As did 2015’s Tianjin port explosions, considered the industry’s third most costly loss in history at over USD 3.5 billion. Storms and major catastrophes, like the Tianjin port explosions, are not the only reason that the market is looking to correct itself.

Even though modern ships are made of steel, rather than the wooden ones in the days of Lloyd’s coffee house, fires at sea can have devastating consequences. A concerning trend has been shipboard fires. Fires on container vessels are a key cause of costly claims, not to mention complex ones. It took crews more than a month to extinguish the fire aboard the Maersk Honam in 2018, which destroyed more than 2,500 of the 7,800 containers aboard. It will likely take years to settle, due to a variety of factors including the sheer number of insureds, identifying the root cause, and more.

Fires are a growing problem. There were 9 major cargo vessel fires in 2019, alone. The National Cargo Bureau attributes the increase in fire risk to a variety of factors, starting with poorly stowed, undeclared or misdeclared dangerous cargoes. Further adding to the risk is an increase in the number of containers being carried combined with a trend of ever-larger containerships.

Navigating a new route
Today, the cargo market is in a state of distress and correction. While Lloyd’s of London is still a hub for marine cargo risks, Lloyd’s issued a directive to its syndicates that they must improve their profitability or exit the market. Many insurance carriers have withdrawn from certain marine lines of business including cargo. Capacity has pulled back. While these corrective actions are necessary to sustain cargo insurance carriers’ long-term commitment, these market conditions can put some stress on buyers looking for marine coverage. For one, prices have been on the rise. It can be especially tough for certain commodities or cargo types to find adequate capacity to cover their risks.

All of these factors have conspired to make the marine cargo market very different than it was just a year or so ago.

All of these factors have conspired to make the marine cargo market very different than it was just a year or so ago. Many carriers have restricted their appetites or exited the market outright. Carriers who are staying in the market may avoid entire industry segments or avoid theft-prone or sensitive cargoes, like diagnostic equipment or perishables. Some may offer lower limits. 

Using a subscription model is also becoming a way for American based carriers to continue to provide coverage which meets demand. The lead carrier sets the rates and terms, with subscribers (other carriers) following suit. This has long been a popular model among Lloyd’s syndicates. The downside is that the process can be burdensome for carriers, brokers and insureds, alike. 

Leveraging reinsurance strategically provides carriers with a certain measure of added flexibility. The transfer of risk to another 3rd party is becoming increasingly more popular as compared to the soft market where carriers retained more risk. However, the price of reinsurance capacity is rising which also contributes to the harder market and increased rates.

Even while carriers are being more selective, insureds and their brokers can help. Providing clear underwriting information, demonstrating how risks are protected and generally telling a more complete story about why your risk is better can significantly help.

With all of these shifts in the market, we have seen reductions in staffs on both marine underwriting teams for hull, liability, and cargo. This phenomenon provides challenges for both insureds and carriers. 

Making waves with new technology
It can be particularly challenging for when trying to place coverage for smaller to medium-size risks (Turnover <USD 25M). According to the Bureau of Transportation Statistics, the U.S. transportation system moved a daily average of about 51.0 million tons of freight valued at more than $51.8 billion in 2018. In its Freight Analysis Framework, the bureau estimates tonnage will increase at about 1.2 percent per year between 2018 and 2045. 

To address the larger volumes of small to midsize cargo risks, AXA XL’s Marine Insurance team recently partnered with Vindati, an insurtech managing general underwriter (MGU) offering specialty products and an integrated shopping experience for brokers and agents, to offer ocean cargo insurance for small and middle-sized businesses via Vindati’s online platform.

A licensed broker can register and access the platform. The whole process is streamlined with straightforward terms & conditions. Premium is paid directly on the site and proof of insurance is issued immediately. It is even possible to obtain just-in-time coverage. Recently, a client was able to secure same-day coverage for an emergency shipment of PPE and ventilators, complete with a Negotiable Certificate of Insurance, in a matter of minutes.

Cargo types that have already turned to this platform for cargo insurance coverage include:
• General cargo
• Raw materials
• Engine components
• Paper
• Office supplies
• Mobile accessories
• Construction materials

The Marine Cargo market has changed a lot in a short period of time. But as cargo volume grows as companies try to keep pace with demand for their products across the US and in every corner of the world, the need for cargo coverage has never been greater. Calling on its long market history and experience and enlisting new technologies to help, the Marine Cargo market is committed to helping clients keep shipments safe while they are getting from here to there. 

About the Author
Andrew D’Alessio is Head of Ocean Cargo for AXA XL’s Americas Region. He can be reached at

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US- and Canada-Issued Insurance Policies

In the US, the AXA XL insurance companies are: AXA Insurance Company, Catlin Insurance Company, Inc., Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Specialty Insurance Company and T.H.E. Insurance Company. In Canada, coverages are underwritten by XL Specialty Insurance Company - Canadian Branch and AXA Insurance Company - Canadian branch. Coverages may also be underwritten by Lloyd’s Syndicate #2003. Coverages underwritten by Lloyd’s Syndicate #2003 are placed on behalf of the member of Syndicate #2003 by Catlin Canada Inc. Lloyd’s ratings are independent of AXA XL.
US domiciled insurance policies can be written by the following AXA XL surplus lines insurers: XL Catlin Insurance Company UK Limited, Syndicates managed by Catlin Underwriting Agencies Limited and Indian Harbor Insurance Company. Enquires from US residents should be directed to a local insurance agent or broker permitted to write business in the relevant state.