Iris Ip
Challenges ahead as the marine market develops in China, Iris Ip of Munich Re tells IUMI, By James Brewer
China is a challenging insurance market, Iris Ip, head of marine underwriting (Greater China) at Munich Re, Hong Kong, told the 2014 annual conference of IUMI.
Ms Ip said: “In the changing world, China is the main focus of the past decade and the coming period of time, ” and she indicated the salient trends that had to be monitored carefully.
She said that marine market growth rate in China has slowed down, and even reversed in 2013 and probably in 2014. There were an increasing number of insurance entities, which meant competition was greater. With keen international and domestic competition, there was a focus on rate cutting .
She warned of a rising incurred loss ratio, and increased acquisition costs (the direct costs such as commissions paid to a broker, that an insurer incurs to secure a premium), which were already very high at 20%; while insureds were wielding more bargaining power.
While non-life insurance premium was forging ahead in China and in 2013 reached $100bn, marine insurance premium did not enjoy the same growth. Its share of non-life premium had been almost 5% in 2004, but now it was less than 2%. Hull and cargo growth rates were negative in 2013, nor was 2014 turning out to be a very good year.
Star Cruises ship passes through Victoria Harbour, Hong Kong.
This was at a time when vessel capacity in the 10 years to 2013 rose from 86m tons to 244m tons, an increase of 184%.
Container port traffic was up 206%, to 190m teu. Six of the world’s 10 largest container ports were in China, including Shanghai at number one, having overtaken Singapore, said Ms Ip. Shenzhen and Hong Kong were at numbers three and four in the container port league. (About 20% of China’s total international trade is said to be routed through Hong Kong).
Despite the difficulties of some yards, Ms Ip underlined that China remains a big power in shipbuilding. According to Clarkson Research, China had 38% of the global newbuilding order book by tonnage, leading the table ahead of South Korea with 31%.
Domestic trade in China was going up, with more trucks on the road and greater capacity. The number of trucks had risen to 14.2m in 2013, from 6.4m in 2004.
Ms Ip reminded the meeting that in 2009 the Chinese State Council set Shanghai to be an international financial and shipping centre by 2020, by providing tax incentive to insurance of ocean-going hull, container, import and export cargo.
Ms Ip noted meanwhile that more energy business had resulted from greater investment in local and overseas energy sectors.
She said that developments meant higher demand for expertise and professionalism in insurance.
