Marine insurers will be hit by low interest rates and a weak global economy, according to American Institute of Marine Underwriters (AIMU) Chairman Robert Gallagher.

“We will be operating in a low-interest-rate environment for the foreseeable future,” he told the AIMU annual meeting in New York.

“Low interest rates mean insurers must place a greater reliance on underwriting success to produce profits. Companies must adopt an underwriting-first principle rather than writing for market share.”

Marine insurers must also improve their combined ratios to maintain returns to shareholders, even in a highly competitive market, he says.

Mr Gallagher says global economic performance also affects marine insurers. “A flattening of world trade produces little exposure growth. In other words, the number of ships we insure and the value of their cargoes.”

The Panama Canal expansion project, which will allow more and larger ships to pass through, also poses a challenge.

Although the risk of casualty on large container vessels may be lower, the severity of accidents will tend to be higher, Mr Gallagher says.

He is also concerned by the US drought. “Any reduction in agricultural production would result in less cargo to insure.”

As more offshore wind farms are built, transporting turbines poses a challenge to marine underwriters, Mr Gallagher says.

Nor have traditional risks such as cargo theft diminished. AIMU reported a combined gross ratio for all marine lines of 90.3% last year – worse than the 82.3% recorded in 2010 but better than the catastrophe-hit 2011 property/casualty result of 106%.