ABSTRACT
This basic analysis reveals that the amount of marine insurance premium written in the London Market has gone down by 50.25% in just four years.22 There are a number of factors behind this decline. One reason is that many countries, today, prevent direct insurance business from being placed outside their own national markets for foreign exchange reasons.23 This is particularly the case for cargo insurance and, as a result of this, more business has been retained by local markets.24 Another reason is the cautiousness of the underwriters in the London market after the bad underwriting years of the late 1980s. Numerous catastrophes, which occurred during those years,25 made the underwriters a bit more selective in accepting insurance. In the early 1990s, underwriters in the London market chose not to provide cover for certain types of vessels, usually those which involve high risks. In this way, the market missed the opportunity of expanding its capacity to the developing countries.26 Also, when commenting on the reasons for the decline in the amount of premium earned in the London market, one should pay attention to the currency fluctuations. Measured against sterling, the US dollar fell 7.32% from 1995-98. This has a great impact on the figures calculated, due to the fact that US dollar is used in most of the transactions carried out in the London market. Accordingly, it is natural that there will be a drop in the figures when they are calculated in sterling. However, the main reason for the London market losing its market share is intense competition coming from some other markets. The German and Norwegian markets, whose marine warranty regime in relation to hull insurance has been examined in the previous chapter, are amongst those markets, according to the recent Annual Report on the London market published by the ABI,27 and figures 2 and 3
22 Statistics also suggest that the drop in the amount of premium written has been going on since 1992. During that year, the amount of marine insurance premiums written in the London market was £1,278 m; £1,249 m in 1993 and £969 m in 1994. Aviation and transit insurance business carried out in the London market have also shown decrease during the same period. The amount of drop has been 41.2% for aviation and 7.27% for transit insurance.
