SHIPOWNERS, LLOYD’S UNDERWRITERS DISCUSS WAR RISK CHANGES

SHIPOWNERS, LLOYD’S UNDERWRITERS DISCUSS WAR RISK CHANGES    The International Chamber of Shipping and the International Association of Independent Tanker Owners, two European bodies that represent shipowners, have met the “joint war committee” of Lloyd’s Underwriters Association in London to express their concerns over substantial changes in hull war risk cover for ships.
   Insurance companies have notified shipowners of very large increases in marine insurance following the Sept. 11 terrorist attacks, and added areas where war risk applies. The hull war risk cover for a ship calling at an Israeli port is now as much as 0.7 percent of vessel value, an industry source said.
   Shipowner representatives told underwriters of shipowners’ concerns about the potential for a very steep rise in marine insurance premia and sought explanation as to why an effective cash call was being requested during the course of the policy cycle rather than adjustments being sought on renewal. They also asked why “a very broad range of additional premium areas” were introduced.
   “These very wide measures were considered to be unjustified in the present circumstances and gave the impression that underwriters were using the marine sector to claw back catastrophic losses sustained in other sectors,” the International Chamber of Shipping said.
   Underwriters replied that the marine market has been extremely soft and during the past 4 years, they have sustained considerable losses, according to a letter issued by the International Chamber of Shipping. In underwriters’ view, the shipowning community had enjoyed the benefit of this soft market and the swift reaction to recent events had to be viewed as “necessary medicine” for the considerable change in circumstances.
   Underwriters pointed out that such reinsurance as might still be available would be at a dramatically increased cost. Underwriters also stressed that war risk underwriting operated in a free market where no concerted action could be orchestrated and where rates were therefore negotiable.
   Chris Horrocks, secretary general of the International Chamber of Shipping, said that shipowners recognize that hull war risk insurance had been inexpensive in recent years, and now faces much higher premia. “But owners have been calculating their daily rates on the basis of cheap insurance,” he said. “It has an impact.”