The rise in frequency of major vessel casualties came on the back of rising energy claims against a reducing premium base, and the increased cargo accumulation risk onboard vessels and in port.
The trend in total vessel losses from 2000 onwards, however, continued its downward trajectory through to 2016 notwithstanding a minor uptick in 2015. The IUMI noted that the market in general reported a reduction in frequency of claims but an increase in the average cost of the claims.
The main causes of the total losses to 2015 were weather related but the frequency of losses caused by grounding or machinery damage were not increasing faster than any other cause. This was followed by fire and explosion which had remained largely constant since 2006.
With the frequency of major vessel casualties on the rise, energy claims are also increasing against an already limited premium base, which has been reduced further due to very little offshore infrastructure spending and reduced drilling activity.
In the mobile sector, concerns were raised over re-activation of rigs after a prolonged period of lay-up and the potential impact on attritional claims activity. The low day rate environment also reduced asset values and negatively impacted insured values.
For platforms, lack of activity meant that attritional claims costs were below the historical trend but the number of significant losses were above that trend line. This was particularly concerning given that the premium base had dwindled by at least two-thirds.
“The offshore sector continues to face challenges that look likely to get worse before they get better. Energy risks per se have not reduced, but the premium base from which they are settled, or reinsured, has shrunk dramatically,” said Donald Harrell, chairman of IUMI’s facts & figures committee.
In the shipping segment, accumulated losses both onboard ship and in port continued to be of concern for cargo underwriters.
The new generation ULCC capable of carrying 20,000 teu with a potential cargo value estimated at $985m represented a significant risk for cargo underwriters and one that continued to increase. The ship MSC Flaminia, for instance, suffered a fire in 2012 and carried a cargo valued at $115m.
The IUMI pointed out that accumulation risk in ports, particularly Chinese ports, was thought to be even greater. It was estimated that the value of cargo throughput at Shanghai could reach $1.6bn a day, Shenzhen $681m and Tianjin $477m. The explosion at Tianjin in 2015 also resulted in a significant loss. The total cargo estimated to be onboard the 754 ships in the port on the day of the incident would have amounted to more than $53bn.
“The disaster in the port of Tianjin in 2015 serves as a reminder of the growing accumulation risk that continues to dog our sector and one that will only intensify over the coming years,” said Harrell.