Disruption, according to Berg, is the raft of technology and business innovation that is destroying existing business models and which extends to every corner of the business world. It is exacerbated by the current macro-environment of a stagnant economy and increasing national protectionism that is continuing to affect premium income.
Incoming innovation is already impacting activities such as electronic navigation and smart port logistics and is driving new initiatives including autonomous shipping and intelligent containers. Blockchain technology and the Internet of Things are two additional technological advances that will drive disruption further.
Berg explained: "We need to inhale innovation. Digitalisation will change the way our clients operate and we, as marine insurers, must follow suit. In the future, insurance will be placed on electronic platforms, as our next generation of clients will want 24/7 access to insurance products and instant responses. The insurance value-chain will shrink and the role of the broker will inevitably be impacted as well. Because of this, it is likely that global premium income will continue reduce and this means that we, as marine insurers, need to change our game and find additional streams of revenue.
"Although the next generation of clients will demand a more rapid and responsive marine insurance sector, they will also require more customised solutions and that represents a significant opportunity for us. I predict a much greater future need for consultancy, claims management and loss prevention advice and the income we can derive from those activities will address the shortfall in future premium income. Digital innovation does not have to destroy value in our market.
"Underwriting is a personal business driven by relationships and it is that strength that will help protect the sector in the future. Trust and reliability are the core currencies of marine insurance and these qualities cannot be replaced digitally – we need to capitalise on that," he said.
Within the industry itself, Berg highlighted the need to recruit high quality new entrants against increasing competition from other business sectors.
IUMI also reported that global marine underwriting premiums for 2016 fell to $27.5 bill, a 9% reduction on the figure reported for 2015.
Vice chairman of IUMI's Facts & Figures Committee, Astrid Seltmann, explained:
"The 2016 number follows a continuing downward trend in marine underwriting premiums. In 2015 the adjusted figures of $30.5 bill was in itself a 9.9% reduction from 2014. We attribute part of the reduction to the strong US dollar when compared with other currencies, but also to general weak market conditions in terms of the global economy, general commodity prices and the poor state of the shipping and offshore sectors.
“This worrying downward trend leads to an increasing mismatch between income levels and the marine insurer's obligation to cover major losses, particularly in light of the trend for larger vessels and greater accumulation of risks in port," she said.
Premium income in the cargo sector was reported as $15 bill for 2016 – a 6% reduction on the 2015 figure.
The hull sector achieved a premium income of $7 bill, which was a 10% reduction on the previous year. Although exchange rates may have been partly attributable for the decline, this has much less impact than in the cargo sector due to the global nature of the hull portfolio.
Whilst the world fleet continues to grow, it also continues to age. A certain reduction in vessel values will follow with the ageing of these vessels, but the two-digit drop in values from 2015 must be seen in the context of the challenging market environment. Hull premiums have deteriorated in line with falling average vessel values and there is now a mismatch between fleet growth and income levels.
Claims frequency continues its stable/downward trend and total losses are also continuing a positive trajectory albeit with a recent fluctuation of around 0.1%.
The outlook for 2017 is challenging and uncertain.
Also speaking at this week's IUMI conference, marine and engineering consultancy and survey company – LOC Group – called for greater international co-operation to better manage maritime casualties.
Capt Jonathan Walker, a consultant from LOC's Singapore office, raised concerns over the increasing trend to criminalise seafarers following a casualty; the lengthy period it was now taking to arrange salvage and complete the investigative process; and the growing requirement to remove wrecks irrespective of cost or environmental impact.
In general, enhanced and regular communication between all parties – governments, maritime authorities, shipping companies, regulators, insurers and others – is required to ensure future shipping casualties were better managed, the environment protected, and seafarers' rights secured, he said.