General rates for marine cargo in Australia are set to rise by as much as 10% over the next two years, driven in part by growing market losses, Aon says in a quarterly update.

While underwriting appetite remains strong, the deteriorating loss trend in Australia as well as globally is fuelling concerns, according to the broker’s Marine Cargo Insurance Market Insights for the second quarter.

“The state of the market remains firm with general increases across renewals and expectations for those increases to slow over the next 12 to 24 months as insurers return to profit and reinsurance costs steady,” Aon says.

“We expect general premium increases for the next 12-24 months from anywhere between 5-10% and eventually a plateau.

“At which point we then anticipate renewals will be seen to be placed at expiring rates with minimal general increases but always subject to global losses and reinsurance costs.”

Accounts with poor records are likely to see increases in excess of 10%, with some premium consideration for increased excesses.

Aon says its observations indicate underwriters are applying more scrutiny with a focus on procuring accurate data for assessment.

There appears also to be an increased emphasis on detailed senders' information, shipping/carriers and storage locations.

“The impact that recent industry losses will have on ratings is unknown but, inevitably, if they continue then we will see some variations to the way underwriters approach writing international marine cargo risk, and premium increases will follow,” Aon said.

Aon says based on insurer market losses “it is evident that the current marine cargo premiums remain unsustainable and will continue to see gradual year on year rate adjustments to correct ratios to offset growing industry losses”.

On the whole, the marine cargo insurance market in Australia is “weathering the storm” compared to what is being seen elsewhere.

“Already this year we are witnessing a surge in interest and appetite to underwrite marine cargo which is increasing free capacity in Australia,” Aon said.

“As a true test of market conditions, we are yet to see a placement that couldn’t be filled, and underwriters are still capable and investing in quoting entire programs.”

Click here to access the report.