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Hull insurers face premium loss as Maersk plans captive expansion

Company will take more insurance in-house in response to oil sale and drilling demerger

Shipping giant Maersk is to take more insurance in-house through its insurance captive, its head of risk management has confirmed.

The move is in response to the changes to the wider group’s structure, Lars Henneberg told Lloyd’s List.

The hull market faces some loss of premiums as a result, as hull pricing will now be set internally, he said, but crucially protection and indemnity (P&I) arrangements remain unchanged.

The changes come in the wake of the sale of Maersk’s oil business to Total in 2017 and the planned float of Maersk Drilling next month, which between them significantly reduce the overall size of the group.

Maersk is a maritime giant, owning close to 1,000 vessels and chartering in 400 more, operating 76 ports and more than 100 inland facilities. It also buys lines including property and personal insurance.

Henneberg presented the development as a matter of evolutionary change for the Maersk Insurance captive, which has operated for the past eight years, during which time it has been able both to develop insurance expertise and capital reserves.

In addition, there is an obvious imperative to use Maersk Insurance in a way that reduces the cost of risk of Maersk’s entire insurance portfolio.

“Some of our energy businesses are being separated off, so we are having to look for other ways of increasing volume and diversification in our premium income,” Henneberg said.

“We have to work a little bit harder and more of our insurances have to go through Maersk Insurance. Over a gradual period, we are turning Maersk Insurance into a one-stop shop.”

Fortunately for a hard-pressed marine insurance sector, the term “one-stop shop” is a slight misnomer here. Significantly, P&I procurement will remain as at present and workers’ compensation and long-tail business will also be excluded.

Hull insurance will – as now – be fronted by a commercial company, which will provide claims services. But cover will be reinsured into Maersk Insurance and then reinsured again into the commercial market on the back side.

“It is a change in that we will start pricing the programme ourselves for the part we retain, where the price was previously set by a commercial market leader,” Henneberg said.

Maersk Insurance will proceed cautiously in the first instance and see how things work out, with 70% to 80% of the value reinsured, depending on vessel type.

Henneberg declined to discuss the size of Maersk’s present insurance bill but the loss to the hull market would be relatively limited, he stressed.

“The structure will be adjusted, but a significant part will still be in the hull market. If they lose premium, it will probably be marginal at this stage.

“It’s an adjustment of the model and there will still be significant commercial involvement on the hull side.”

Ports are already insured through Maersk Insurance to a large extent and this will increasingly be the case under the plan.

Recent major casualties on Maersk ships include the fire on Maersk Honam last year, a collision involving chemtanker Carla Maersk in 2014 and water ingress in the engine room of Emma Maersk in 2013.

 

This article first appeared in Lloyd’s List, a sister publication of Insurance Day

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