Frequency of major vessel casualties increases: IUMI
The frequency of major vessel casualties rose in 2016 for the second consecutive year, according to the International Union of Marine Insurance.
Conversely, the trend in total vessel losses (from 2000 onwards) continued its downward trajectory through to 2016.
The main causes of the total losses to 2015 were weather related but the frequency of losses caused by grounding or machinery damage are now increasing faster than any other cause. This was followed by fire and explosion which had remained largely constant since 2006.
“Marine risks continue to grow both in size and complexity and it is vital that underwriters fully understand the potential losses that they are being asked to insure,” said Donald Harrell, chairman of IUMI’s Facts & Figures committee.
“It is gratifying to see the year-on-year decrease in total losses, but we must take particular notice of the recent increase in major casualties and the reasons for this.”
Meanwhile in the energy sector, a significant drop in offshore activity with very little infrastructure spending and reduced drilling activity has significantly depleted an already limited premium base, IUMI said.
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.
As expected, the low day rate environment has reduced asset values which impacted negatively insured values
For platforms, lack of activity has 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.
Harrell commented: “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.”
In cargo, accumulation losses both on board ship and in port continued to cause concern for underwriters.
The new generation Ultra Large Container Carriers were capable of carrying 20,000 TEU with a potential cargo value estimated at $985 million. This represented a significant risk for cargo underwriters and one that continued to increase. Put in context, MSC Flaminia which suffered a fire in 2012 carried a cargo valued at $115 million.
Accumulation risk in ports, particularly Chinese ports, are thought to be even greater. It was estimated that the value of cargo throughput at Shanghai could reach $1.6 billion a day, Shenzhen $681 million and Tianjin $477 million. The explosion at Tianjin in 2015 also resulted in a significant loss but might have been much worse. 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 $53 billion.
“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,” Harrell commented. “As marine underwriters, we must continue to innovate and provide cost-effective insurance solutions to enable seaborne trade to continue without interruption.”
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