Marine insurers are operating in precarious conditions despite the sector enjoying a 2% rise in premiums to $US28.5 billion ($39.3 billion) last year, the International Union of Marine Insurance (IUMI) says.

An increasing mismatch between premium income, covered risk and claims cost is hurting the sector, delegates were told at the IUMI annual conference in Cape Town last week.

Buffers to cover extraordinary single or accumulation losses are non-existent.

“This upswing is largely attributable to growth in trade plus the strengthening of European and other currencies against the US dollar,” IUMI Facts and Figures Committee Vice Chairman Astrid Seltmann said.

“But it masks the dramatic situation which is unfolding when current premium levels are viewed in relation to covered risks and the impact of claims.

“In general, the IUMI statistics clearly illustrate the need for sustainable underwriting by understanding the simple – and sometimes not so simple – mathematics of evaluating the risks and expected costs associated with a prudent marine portfolio.”

Low oil prices are eroding premium income in the offshore energy market while mega-losses from natural catastrophes have hurt underwriting profits in the cargo market.

Cargo accounted for 57% of marine premium last year, hull 24%, offshore energy 12% and marine liability 7%.