Marine lines enjoy strong pricing. (Briefing).

The head of a U.S. marine underwriters trade group said that, more than a year later, the Sept. 11 terrorist catastrophe continues to "loom large" over the sector. And while marine and cargo underwriting performance kept pace with the rest of the property/casualty industry since, the terrorism threat to the massive shipping industry is a big worry.

Speaking at the annual meeting of the American Institute of Marine Underwriters, the organization's chairwoman, Deirdre Littlefield, said a recent report from a task force of the Council on Foreign Relations found that the United States is still "dangerously unprepared" for future catastrophic attacks, and that trade security -- particularly seaports -- is one of the main areas of concern. "The fact is that 95% of all non-North American U.S. trade moves by sea and arrives in 361 ports around the nation," said Littlefield. "And despite the vital role seaports play in linking America to the world -- both economically and militarily -- port vulnerability studies are not scheduled to be completed for five more years."

Littlefield added that container traffic and energy imports are being increasingly concentrated in a few U.S. ports, "making them inviting targets." For example, 43% of all maritime containers arriving in the United States in 2001 came through the ports of Los Angeles and Long Beach. "As the recent West Coast port closures demonstrated, the cost to the economy of closing these ports totals about $1 billion per day for the first five days, and rises exponentially thereafter," she said.

The West Coast dispute, capped by a management lockout that shut down 29 ports for 10 days, ended in October after President Bush invoked a mandatory cooling-off period, but the dispute could end up costing the economy billions of dollars and insurers an unknown price.

The Pacific Maritime Association -- which operates the 29 West Coast ports -- locked out workers with the International Longshore and Warehouse Union, representing about 10,500 members, after the two sides failed to negotiate a new labor contract after the last one expired in July. The main hurdle in the contract talks involves proposals to introduce technology that would allow faster and more efficient tracking of cargo that moves through the ports--something the union fears will cost its members jobs. The two sides reached a tentative agreement on a new contract in late November.

Since about 90% of the world's general cargo is shipped in standard box containers, an explosive device hidden in one such container and detonated in a major port could have severe economic and insurance implications, Littlefield said. Terrorism's possible impact on marine underwriting was evident when the alleged terrorist bombing of a nightclub on the resort island of Bali killed about 200 tourists, and prompted marine underwriters to consider raising rates for shipping in Indonesian waters for the the first time in years.

Combined Ratio: Ocean Marine vs. All Lines

       Ocean Marine  All Lines

'90       118.2        109.8
'91       114.6        108.8
'92       119.4        115.8
'93       109.5        106.9
'94       107.9        108.5
'95        92.4        106.5
'96        89.6        105.8
'97       102.2        101.6
'98       110.6        105.6
'99       115.8        107.9
'00       102.5        110.0
'01 E      99.0        116.0

Source: A.M. Best, Insurance Information Institute

Note: Table made from bar graph

Change in Net Premiums Written: Ocean Marine * vs. Commercial Lines

       Ocean Marine  Commercial Lines

'90       -2.3%            3.2%
'91       -1.2%            0.1%
'92        5.4%           -1.9%
'93       22.9%            6.7%
'94       18.4%            3.7%
'95        8.9%            1.9%
'96        2.8%            1.3%
'97       -5.6%            0.4%
'98       -3.0%            0.5%
'99       -6.4%            1.8%
'00       -0.4%            7.2%
'01 E     16.8%           12.0%

* 2001 estimate Ocean Marine is preliminary American Institute of Marine
Underwriters figure based on direct wirtten premium.

Source: A.M. Best, Insurance Information Institute

Note: Table made from bar graph