The cargo sector must create a more sophisticated modelling environment if it is to drive better underwriting results a leading cargo expert has warned..
As the International Union of Marine Insurance reported that the cargo classes have slipped into an underwriting loss for the first time since 2000 cargo underwriters have been told they need to get more sophisticated in how they model their risks particularly those static risks.
The use of new geo-mapping whilst commonplace in the property underwriting class has yet to be used it any great degree in the cargo market and Mike Davies Chief Underwriting Officer Marine for Zurich in Asia said the cargo classes needed to create a greater modelling capability.
“The property underwriters have well established models which enable them to accurately address the risk and rate it accordingly,” he said. “Cargo underwriters do not have such sophisticated systems and in some ways there are some which are still naive about the risks they underwrite and the prices they charge.”
“We have long feared that the cargo sector was facing a slip into a loss and now that has become a reality for 2009 for the first time since 2000,” explained Mr Davies
He also warned that there was a growing concern over the way in which cargo underwriters were picking up static risks which were deemed to be poor by the property underwriting community.
“There have been growing concerns in some quarters that property underwriters have been increasingly looking to shift poor static cargo risks into the cargo market and take advantage of the lack of sophistication and in some cases a naivety I have been talking about,” he explained. “We have cargo underwriters who are congratulating themselves as they have been winning business but they have not won it. It has been passed off to them by underwriters who see it as poor risk.”