LONDON, 4 June 2009 – Ship owners are facing challenging negotiations at 2009/10 renewals as marine insurers seek rates increases on all classes of business. However, according to the 2009 Marine Insurance Outlook* from Aon – the world’s leading insurance broker – abundant capacity means competitive forces will create a balancing act in the market.

Following an average rise in protection and indemnity (P&I) rates of up to 15% at the February renewals, there has been an increased sense of determination on the part of other marine underwriters to move rates back up. Insurers must adapt to the prospect of falling revenues due to reduced marine activity and thus lower premium volumes, coupled with decreasing investment income. As such, hull and liability underwriters are seeking to impose rate increases in the range of 2.5% to 7.5% for attractive business.

However, abundant capacity in most classes of insurance is keeping a lid on rate rises and there are no obvious signs that capacity for marine insurance risks will decline significantly in the short term.  The squeeze will come as ship owners seek to reduce operating costs in the face of a dramatic reduction in trade.

Steve Beslity, Global CEO of Aon Marine, said: ”So far at least, the recession appears to have had much less impact on the marine insurance market than the shipping industry itself. While the market is generally looking for rate increases, insurers continue to offer attractive terms for well managed risks. Although the markets may attempt to talk up pricing simply because it seems logical to do so in the present difficult economic circumstances, the evidence suggests there is no reason to overreact at this point.

“The relationship between the marine insurance markets and their customers is finely balanced at present. There is a likelihood of a clash between the understandable desire of the shipping industry to reduce costs versus insurers’ requirements to generate acceptable margins. There will be challenging negotiations ahead across the spectrum of marine insurance during 2009 and into 2010.”
Ends

* Access the report at: http://img.en25.com/Web/AON/Aon_Marine_Insurance_Market_Outlook_2009.pdf

For more information contact:
Alexandra Lewis
020 7882 0541
Alexandra.lewis@aon.co.uk
http://aon.mediaroom.com

About Aon
Aon Corporation (NYSE: AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, and human capital consulting. Through its more than 37,000 colleagues worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon's industry-leading global resources and technical expertise are delivered locally through more than 500 offices in more than 120 countries. Named the world's best broker by Euromoney magazine's 2008 and 2009 Insurance Survey, Aon also ranked highest on Business Insurance's listing of the world's largest insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008. A.M. Best deemed Aon the number one insurance broker based on brokerage revenues in 2007 and 2008, and Aon was voted best insurance intermediary, best reinsurance intermediary and best employee benefits consulting firm in 2007 and 2008 by the readers of Business Insurance. For more information on Aon, log onto http://www.aon.com/.

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