The U.S. inland marine line rebounded to pre-COVID-19 pandemic levels owing to a strong increase in top-line premium and a decline in the loss ratio, according to an AM Best report.
The new Best’s Special Report, titled, “Inland Marine Rebounding From Pandemic Obstacles,” states that inland marine insurance, typically among the most profitable property/casualty (P/C) lines, experienced its worst loss ratio in 12 years in 2020, even higher than the P/C industry’s overall loss ratio, breaking a decade-long trend. Amid the pandemic surge, inland marine insurers saw costs to settle damaged cargo claims and contingency claims from event cancellations increase significantly.
However, according to the report, inland marine premiums rebounded and grew by 15% in 2021, following a 2% decline in the previous year, attributable to the lifting of COVID-19 travel and cargo movement restrictions, the economic recovery and the general hardening of the commercial insurance market. “If the U.S. economy avoids a prolonged recession, inland marine premium should continue to grow,” said Christopher Graham, senior industry analyst, industry research and analytics, AM Best.
“The general hardening in the property market and growing focus on adequate property valuations should contribute to inland marine premium growth.” The inland marine segment’s loss ratio also improved by approximately 15 percentage points to 49.5%, in line with the loss ratio prior to the pandemic.
Inland marine insurance is composed of a very diverse group of coverages, including cargo, communications equipment (e.g., cell phones), event cancellation, fine art, personal watercraft and pet health insurance, among others. In particular, pet and travel-related insurance lines were bright spots in 2021, related to pandemic factors.
“Although the market remains top-heavy, with two insurers writing more than 25% of direct premiums, concentration has been diluting slowly,” said David Blades, associate director, industry research and analytics, AM Best. “As niche coverages such as pet insurance grow, AM Best expects further market dilution.”
Going forward, the inland marine insurance segment could be impacted by lower shipping activity due to the inflationary pressures, and if the United States moves toward a recession. However, inflationary pressures on cargo values also could lead to premium increases that outpace the drop in goods shipped. At the same time, inflationary pressures also will challenge construction spending, which rebounded in 2021 and even exceeded 2019 levels. Housing starts, which were near a post-financial crisis peak, have started dropping as well.