60 Seconds with Stephen Barr

Now, with 20 years of service behind him as a marine underwriter in the P&I sector in Lloyd’s and the London market, he would have it no other way. Stephen – Marine Director, Marketform Managing Agency Limited – joined Marketform in October 2008 to establish its new marine division.

Marine insurance is one of the old insurance markets. How has it evolved?

Marine insurance is the cornerstone of Lloyd's and from this it has established its centre stage position in the international insurance markets. The willingness of underwriters to wager on a ship or cargo reaching its destination matched the pioneering spirit of entrepreneurial ship owners in the 1700s.

The challenges today are very different, but the flair for business and ingenuity that currently thrives in Lloyd's has great appeal for companies who value tailor-made solutions to their insurance needs.

Why is marine such an attractive business for insurers?

Marine insurance hasn't always been in favour, but the comparatively low exposure to natural catastrophe perils has appeal. In recent years, marine has been profitable and relatively stable which has been attractive to investors.

Rating levels are now at precariously low levels and, as reserve releases dry up, technical underwriting results may quickly lead others to ask themselves this question.

How competitive is the market at present and how are you responding to this?

Despite the run of natural catastrophes around the world in 2010 and 2011, international markets remain aggressive. But the perception of profitability which underlies this isn't matched by the story we are seeing on the ground in loss records.

The market's failure to address this is evident in generally disappointing renewal terms, which is a function of surplus capacity. We see it as a time to be highly selective and are targeting only modest expansion in most areas.

What impact are natural catastrophes having on the marine market this year?

Too many times in the last year we have been confronted with the first news reports and images of various natural catastrophes including the Australian floods, New Zealand and Chile earthquakes and the Japan Tōhoku earthquake and subsequent tsunami.

There's been a lot of speculation on the likely impact of the natural catastrophes and best estimates put H1 2011 insurance costs of these in excess of $70bn. Despite this there has been little perceptible change in the market. 

Marine underwriters appear to have got away lightly, particularly in Japan where a much larger marine involvement was expected. Hurricane Irene was a serious storm that caused a lot of damage, but it could have been a lot more costly for insurers than currently predicted.

With the best part of two months of the windstorm season left, it is not yet time to relax. Whether marine losses occur, any further impact in the non-marine sector will pile pressure into the marine reinsurance market. This will have an immediate impact on combined ratios and hopefully bring about the correction in direct pricing that most would agree is needed.

The drop in global trade during the financial downturn has inevitably had a big impact on the marine market. Are we seeing any signs of recovery?

We saw some signs of recovery following the first dip in global trade. We are yet to see the impact of recent turmoil in the financial markets. Most of our clients are holding up well, but no-one is immune from the global economy. Falls in economic activity are particularly bad news for an insurance market with surplus capacity.

Piracy is a big issue at present. What concerns are you hearing from your clients and what is the industry doing to manage the risks?

The challenges resulting from the onset of piracy off the Somalian coast over three years ago are complex and ship owners are particularly concerned about the safety of crews. It is estimated that there are currently around 375 crew members in captivity. Our assureds are very aware of the risks of transiting hotspots, such as the Gulf of Aden, and underwriters have embraced new initiatives to help manage what is still clearly a growing problem.