‘Gloom and doom’ for marine insurance, says IUMI

Maritime & Coastguard Agency

The International Union of Marine Insurance (IUMI) has indicated that a number of factors have come together to ensure that 2015 will be a “challenging year” for insurers, combining large claims with a softening market.

IUMI’s recently elected new president Dieter Berg noted, “2014 ended poorly, and 2015 started badly”.
 
Commenting on the start of 2015 he stated: “There were a number of big losses, involving serious casualties and loss of life.”
 
Berg cited the Hoegh Osaka, which was deliberately beached on Bramble Bank off Southampton after developing a major list. “We have had 1,400 new cars aboard, many of them luxury vehicles, which have been declared to be a total loss due to unseen damage – a loss of £100m.”
 
While the number of insurance claims was reducing overall, the size of individual insurance claims was increasing dramatically. “These vessels are getting bigger, and very difficult to manoeuvre,” said Berg. “We’re also seeing container vessels of 19,000 teu and even bigger being planned, as well as huge LNG projects, and in difficult environments such as the Arctic.
 
Mark Edmonson, ocean hull committee chairman, indicated “As the size of the vessels increase, so does their technical complexity. We’re also seeing an increasing gap between salvage capability and the amount we’re underwriting. That risk is increasing all the time. It’s very difficult to salvage container vessels over 4,000 teu, for example.”
 
Edmonson indicated that the deadly issue of liquefaction would have to be “revisited” following the sinking of the Bulk Jupiter “only built in 2006” which was suspected to have been caused by the liquefaction of its bauxite cargo. Ro-ro tonnage would also be a concern in the wake of the Norman Atlantic, which would have “regulators crawling all over it.”
 
“There’s a huge exposure of insurance capacity,” said Berg. “We’re looking at a very changed landscape.” On top of the increasing size of insurance claims, much more insurance capacity was becoming available in all branches of maritime insurance, according to Berg. “There are clear signs of a softening market, and it is here to stay.”
 
Committee chairman of facts and figures Patrizia Kern also indicated that London was likely losing insurance business to regional insurance brokers in Asia and Latin America, and would likely continue to do so throughout 2015.
 
Looking to the offshore marine sector Simon Williams Offshore Energy committee chairman indicated that the oil price would also have a “huge impact”, resulting in “less drilling, more units laid up, and, sadly, layoffs. We’ve seen BP freeze pay already.
 
“There’s little doubt these factors will have an effect on the premium base. The US are hitting their limits at around $50 a barrel, but the Saudis can sustain as low as single-digit numbers.
 
“It’s all rather gloom and doom,” he concluded.

Posted 4 February 2015

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