Global union highlights threats to marine insurers

Leading marine underwriters have held a three day meeting at Lloyd’s to identify the major threats to the business for the year ahead.

The Executive Committee of the International Union of Marine Insurance (IUMI) held its annual winter meeting at Lloyd’s, identifying falling rates and rising claims as immediate threats. Growing fears over the emergence of shipbuilding companies that are taking orders for future vessels without having yards in which to build them was also raised.

IUMI represents marine insurance underwriters across the globe, and Executive Committee Member Simon Beale - also Divisional Underwriter, Marine for Lloyd’s insurer Amlin - said initial figures have seen a rise in the number of both total and partial hull losses for 2007. The rise comes at a time when the premium levels remain flat.

“We are concerned at the increase in total hull losses, which is the first time we have seen a rise for many years,” he said. “We, as a union, will be looking at the casualty figures and seeking to identify if there are any particular reasons for the increase in terms of both physical cause or geographical trends.”

He added: “On the whole the rise in losses may well be down to the fact that it is a booming shipping market with more vessels on the seas that are being asked to work ever harder.”

IUMI will hold its annual conference in September, but the committee has announced the theme of the 2008 event which will be ‘Booming Global Trade Opportunities and Threats for Marine Insurance’.

One future threat that identified by IUMI is global shipbuilding capacity.

“China has increased its share of the global shipbuilding market from 22% of capacity to 28% in 2007 largely at the expense of Japan and Europe,” added Beale. “There are concerns over the dramatic change in where the future tonnage is being built in terms of how the shipowners are able to ensure the quality of the vessels.

“We are sure the major shipowners will have supervisors at the yards along with the classification societies, but we are concerned about the smaller owners who may not have the ability to dedicate trained staff to oversee the work. In a way the major shipowners have driven standards consistency in the Chinese yards by inspecting and insisting on the quality of the work.”

Fred Robertie, Chairman of IUMI’s Ocean Hull Committee, added: “There are orders being taken by companies for vessels at yards that are green field sites at present because no yard exists. They do not have sheds of welding facilities but have told the owners the ships will be built and delivered in five years time.

“The pressure on the yard capacity across the world has seen owners making these orders and we are concerned that insurers may well see the price being paid in the years to come, in terms of the quality of vessels that are being put into service.

“When you consider it is normal for a vessel to change ownership two or three times before the hull ever hits the water, the question of quality standards in some shipyards is a threat,” Robertie said.