IUMI President Deirdre Littlefield, senior vice president and director of business development and field office management with Starr Marine Agency in New York, noted that in recent years ship owners have benefited from soft premium rates. At the same time, 'all-time historic profits made by owners during the halcyon period marked by the last five years were helped in no small measure by driving ships and crews as hard as possible,” she said.
“Inevitably, such a strategy impacts heavily on claims, and we expect that many ship repairs and onboard unit replacements, which have been deferred or ignored during the sky high profit years, will start to surface, along with the results of skimped maintenance, leading to a further escalation of claims,” she said.
Now, slowing demand, collapsing freight rates and a surge of new ship deliveries, means ship owners and charterers are scrambling to reduce costs and increase efficiencies.
“Unfortunately, this pressure on pricing and conditions comes when underwriters are making equally desperate efforts to stabilize premium rates, and raise prices where the claims record justifies it, to compensate for the relentless increase in hull and cargo claims over the last few years,” she noted.
Littlefield also predicted “spiraling requests for return of premiums applying to ships going into ‘cold’ or long-term lay-up.
“However, there are some positives in this deteriorating situation. We should see a sharp increase in the number of older vessels going to the breakers, thus greatly reducing the curse of substandard tonnage which should not be afloat,” she noted.
“Also, with far fewer ships in service as the downturn bites deeper, it should ease the problem of finding sufficient numbers of trained and experienced seafarers, although recruitment going forward remains a huge problem when seen against the threats of piracy and the criminalization of mariners.”
Littlefield said insurers will look to underwriting, not investments, as the key to profitability in the future, and will allocate scarce capital to those lines of insurance that promise above average returns.
