Weaker greenback to pressure marine insurers amid changing trade patterns

Marine insurers face pressure on income from a weaker US dollar amid changing trade patterns, International Union of Marine Insurance officials said Sept. 8 after reporting a small growth in the industry's premium last year.

To stimulate the US economy in the wake of a jobs print miss, market participants expect the US Federal Reserve to cut interest rates after the Federal Open Market Committee meeting on Sept. 16-17.

"The weakening US dollar will squeeze top-line premium income and add to claims costs for those insurers paying out in non-US dollar currencies," said Jun Lin, Chairperson of the IUMI Facts and Figures Committee, in the industry group's annual meeting.

The combination of falling rates and weakening US dollar positions threatens to squeeze margins across the marine insurance industry, even as shifting trade flows toward Asia-Pacific markets offer growth opportunities, according to IUMI officials.

The industry group reported a premium base of $39.9 billion in 2024, representing a 1.5% increase on the previous year.

Split by region, Europe accounted for nearly 47% of the premiums, followed by the Asia-Pacific region with 29.8%, Latin America 10.2%, North America 7.75%, the Middle East 3.53%, and Africa 1.38%.

"We've seen premium income in Asia grow steadily since 2016, supported by new product lines and increasing intra-Asia trade," IUMI's Chief Analyst Veith Huesmann said. "By contrast, Europe and Latin America appear to have plateaued since 2023.

Cargo insurance remained dominant in the global maritime insurance sector, with total premiums amounting $22.6 billion in 2024, an uplift of 1.6% from 2023, according to the IUMI.

Dated Brent, the international crude benchmark, averaged $82.6/b in 2023, $80.8/b in 2024 and $71.3/b in the first eight months of this year, according to Platts assessments.

Geopolitical transformation

Beyond immediate financial pressures, marine insurers confront a fundamental shift in the global trade architecture that underpins their business models, according to the IUMI. The transition from integrated globalization to fragmented regional trade patterns requires new approaches to risk assessment and pricing.

"The end of globalisation is fast approaching," said IUMI President Frédéric Denèfle. "We've already witnessed a slowdown in recent years, but post-COVID, the trend has accelerated. While some uncertainty over US tariffs has eased, escalating trade tensions and regional conflicts are reshaping the foundations of international commerce."

Insurance officials have suggested that conflicts in Ukraine and the Red Sea exemplify how geopolitical tensions translate into immediate operational challenges, from elevated war risk premiums to route diversification costs.

Ships have been avoiding high-risk regions and using longer, costlier routes, resulting in rising goods prices and subsequent upward effects on inflation, according to Denèfle.

Meanwhile, an aging global fleet has led to rising maritime operational risks, from machinery failures to increased maintenance demands and seafarer well-being, according to the IUMI.

"Claims were relatively benign in 2023 and 2024, but this year has seen an uptick, particularly in groundings, large vessel fires and, of course, war-related losses," Lin said.