South African marine underwriters face increased risks when doing business with vessels from unknown countries in Eastern Europe or China.
Association of Marine Underwriters chairman Gary Lombard said at the associations annual meeting held recently that risks and costs went up in countries where little previous experience was available to act as a guide.
Underwriters should take note that protectionism is over and they should consider the new risks presented by unknown vessels coming to our shores from countries whose trade customs are unknown to us, he said.
Costs of claims surveys in these countries were particularly high as few experienced surveyors were available.
The decline of the rand had added an exchange burden to these costs, he said.
The weakening of the rand has a severe impact on local marine insurers who do almost half of their business in the international arena. The weakening rand will affect policy limits and the cost of protection against claims will rise.
Crime is another factor that has reduced industry profits. Hijackers are increasingly targeting specific items, which result in claims from R500 000 to R1,4m.
In general, the insurers have now introduced certain severe underwriting measures to force an insured to be more consciously pro-active in loss prevention.
However, in spite of these difficulties most insurers had shown a growth in profit. Lombard said he expected growth to continue as companies expanded into new countries, Africa in particular.
Lombard said the redevelopment of Maputo harbour could offset the risk of labour action at South African ports. However, labour remained an unknown factor and advised underwriters to consider it carefully when submitting quotations.
