The marine-hull insurance segment would continue to see muted growth this year due to low premiums and bad financial health of the shipping industry.
Marine hull insurance covers any loss or damage to ships, tankers, bulk carriers, smaller vessels, fishing boats and sailing vessels. It covers all types of oceangoing vessels, coastland/inland vessels, voyage cover, port package, offshore/onshore exploratory risks and ship-breaking, among others. The policy covers risks related to fire, explosion, piracy, theft, earthquake, sinking and catastrophe such as earthquake and volcanic eruptions. Covers are purchased by oil-and energy-sector companies, port authorities, shipowners, shipbuilders, bankers and financiers of ships or vessels who have insurable interest.
Insurers say that the segment is large and has a huge risks associated with it. This field has not been profitable, and, hence, they are going slow.
During April-December 2012, general insurers underwrote a gross premium of Rs 832.85 crores in the marine –hull segment. While public sector general insurers contributed Rs 80.07 crores, private sector general insurers contributed Rs 752.78 crores.
Insurers say that marine-hull segment itself was seeing slow growth, and since the de-tariffing of the segment, on the contrary, prices have dropped.
The marine-hull segment was brought out of the tariff regime in 2003-04. However, instead of seeing a hike in premiums, companies saw a drop due to the bad performance of marine hull as a part of the economy.
For most Indian general insurers, marine hull accounts for about one per cent to three per cent of their portfolio.
In the Rs 1,000 crores marine-hull portfolio, 85-90% was contributed by the energy segment. The other 10% (about Rs 150 crores) was contributed by pure hull.
Hull has seen a slow growth, as international trade and demand for ships have gone down. This has brought down charter rates and decreased valuations, resulting in premium reductions. Devaluation of ships has lead to this muted growth.
The ban on mining is also another reason for this situation. States like Karnataka, Odisha and Goa have barred mining and mining-related activities.
Since the ships used to carry iron ore were lying idle, the premiums on these insured ships also fell. Therefore, insurers do not see any revival in sight for the hull segment.
However, industry experts say that energy still offers a ray of hope for insurers. Marine hull insurance also covers rigs and platforms under the energy (oil) segment. While progress under the new exploration licensing policy has been slow in the initial phases, it would see a positive impact in the long run. With companies like Oil and Natural Gas Corporation (ONGC) making new oil and gas discoveries, insurers believe that the energy segment will pick up in the next few quarters, adding to the business growth of the marine-hull segment.
