Marine insurers “cautiously optimistic”

Marine insurers “cautiously optimistic”

Marine insurers “cautiously optimistic”

   An international group of marine insurers said it is “cautiously optimistic that the savage downturn in the shipping industry is translating into an overall reduction in casualty experience.”
   In a statement issued following spring meetings of the International Union of Marine Insurance in Miami, C'dric Charpentier, chairman of IUMI's facts and figures committee, said preliminary estimates total losses for 2008 were 74 ships compared to 82 for the prior year. (IUMI statistics are for ships 500 gross tons or larger.)
   'Thus, we might expect an ultimate figure of around 95 if we apply the normal deterioration factor because of late reporting, roughly comparable to the 2006 and 2005 years,' he said. It would be an improvement over 2007 when IUMI said there were total losses of 106 ships compared to 92 in 2006.
   IUMI said there was also encouraging news in tonnage lost. IUMI said it has reports of 372,000 gross tons lost in 2008, a 22 percent decrease compared to the figure reported for 2007 at the same time last year. A normal trend of late reporting figures could bring the 2008 total to about 470,000 gross tons, which would be the second-best year since 1980. In 2007, IUMI said a total of 600,412 gross tons were lost compared to 720,669 gross tons in 2006.
   Considering the large increase in the world fleet last year, IUMI said the improvement in total losses and tonnage lost is “even sharper.” Weather continues to be the major cause of total losses, representing about 42 percent for 2008 losses.
   The group said looking at partial losses presented a more mixed picture. The group said there were a “staggering” 975 partial losses in 2007, compared to 725 in 2006. It said preliminary statistics showed 748 partial losses for 2008, an 18 percent decrease.
   'Eventually,' Charpentier said, 'if we expect a total of around 800, this will be a quite high level compared with experience prior to 2007. Taking into consideration fleet growth, it could be considered comparable to 2005 and 2006.'
   Machinery damage continues to be the primary cause of major serious losses, 35 percent or more of the number of incidents during the past five years), followed by collisions (26 percent) and groundings (22 percent).
   Regarding cargo insurance, which accounts for roughly half of all marine insurance premium, Charpentier said that after a number of exceptional years, growth in 2009 was expected to slow to 0.5 percent, its lowest rate of increase since World War II. Between the last quarter of 2008 and the last quarter of 2007, there had been a 45 percent drop in world trade values.
   'All these factors clearly demonstrate a shrinking of insurable values that will have a direct and massive impact on world marine insurance income,” Charpentier said.
   “We still face an uphill battle, therefore, and premium income will fall dramatically as the economic crisis reduces fleet values and cargo volumes, thus negating the encouraging decrease we are seeing on the claims side. The net result will have a significant negative impact on the bottom line at a time when there is no investment income to bolster results,” he said.
   IUMI President Deirdre Littlefield said: 'We fully agree that a high level of casualties is unacceptable at a time when the industry is embracing a whole new safety culture led by International Maritime Organization initiatives. However, our statistics indicate that 2008 casualty experience is going to result in a softer landing. If so, it will be good news for shipping and good news for underwriters.”
   Littlefield said the 2008 outcome may be helped by the reduced number of ships in service and older ships being scrapped.
   She also said there are “encouraging pointers that the safety culture is taking firm root.' In February Efthimios Mitropoulos, IMO secretary general, said there was an 'unacceptably high level' of marine casualties in 2008, and that IUMI agrees “compromising safety by, for instance, deferring essential maintenance work or postponing crew training could have catastrophic consequences.
   'Like everyone else, ship operators are being buffeted from all sides in the growing economic crisis. But to cut corners on maintenance or training can only have one result in the long term — more casualties, higher claims on insurers, and higher premium and deductible levels for ship owners,' she said. ' Chris Dupin