As 2022 comes to an end, there will be much trepidation going into the New Year where we are likely to see more restrictive capital, narrower policies, and a continued hard market. But, there’s also a lot to look forward to where technology is likely to become an entirely integral and non-negotiable part of placing marine insurance.
Our CEO, Andrew Yeoman and Product Director, James Whitlam, share more of their thoughts on what to expect for 2023.
- The Ukraine War - 2022 saw the impact of the Ukraine War reach the primary insurance market. With war premiums at a high and capacity tight, 2022 has been a difficult year. We enter 2023 going through one of the most difficult reinsurance renewal seasons with days of wide coverage, and cheap capital firmly behind us. The direct consequences of the aircraft confiscations in 2022 will undoubtedly play into the marine market in 2023. It’s likely that we’ll see more restrictive capital, narrower policies and a market that has less options potentially leading to a continued hard market.
- Implementation of ESG assessment into underwriting process - Over the last 12 months, ESG measurement & compliance has come to the forefront of the industry, covering topics from emissions and crew welfare to supply chain visibility. However, very few players in the market are actively building these topics into underwriting processes to initiate meaningful change. 2023 will see more widespread embedment of ESG compliance into underwriting guidelines, and ultimately into pricing decisions in the longer term.
- Leading vs. lagging indicators for predicting the future - It is now well established that machine learning models can be successfully deployed and facilitate more efficient and profitable deployment of capital. The last couple of years, however, has proven that the hypothesis that future claims and vessel behaviours will generally be the same as the past, does not always hold true. COVID-19 led to significant changes in supply and demand across the globe, and in extreme cases such as the cruise sector, saw entire vessel segments coming to a standstill. More recently, in the Russia-Ukraine war and the knock-on impact to the global economy, we are seeing the potential for extreme claims inflation. Building leading indicators into machine learning models to incorporate future dynamics, rather than simply relying on data from the past, will give market leaders the edge in the future.
- Further bridging the gap between machine learning and traditional processes - Machine learning and AI have seen increasing adoption in commercial applications to better understand the world in which we live in. An inherent challenge with this approach, however, has been how to explain the outputs and the complex correlations that are identified in terms that can be fully understood and utilised by end-users. New technologies and techniques are emerging to address this, which will ultimately go a step further to bridging the gap between the benefits that machine learning can bring and the more traditional processes that the market is built on. We will ultimately end up with models that are both highly accurate and fully explainable in terms that result in technology being an entirely integral and non-negotiable part of placing marine insurance.