The Strike Club, the leading market for insuring shipowners and charterers wanting insurance protection against delays in the marine trades, reports continuing strong demand for its covers, whether for mutual entries or for its fixed-premium insurance covers for war risks, loss of earnings and bespoke delay risks.
This was the positive message from the managers when the annual general meetings were held recently inHamburg.
The club is now in its 55th year of operation. The aggregate total mutual tonnage entered during the 2011/12 year has grown to 145m dwt, a very healthy increase on the previous year’s total of 135m dwt. “We fully expect that this year will show further growth, ” said Bill Milligan, chief executive of S.C. Management, speaking in Monaco, where the administrative office is located.
He said: “There are many reasons why owners and charterers are increasingly seeking financial protection or higher limits of cover. Firstly, there is great uncertainty about the impact on shipping and ports as the number of debtor countries inEuropegrows. Second, the political, economic and financial maelstrom we are currently facing is leading to a widening of industrial strife as worried workers protest about the threat to their jobs, wages and pensions.
“Outside Europe, we are seeing volatility in major shipping trades as China’s economic bubble shows signs of deflating, restrictions on nickel-ore and bauxite exports from Indonesia, power blackouts across India, blacklisting of British-related flagged ships by Argentinian dock workers, and growing instability across much of the Middle East, including Iran’s threats to close or blockade the Strait of Hormuz, ” said Mr Milligan.
This worrying instability, together with the lack of clear distinctions between war, civil war, revolution, insurrection, riot, political protest, etc., is the main reason the club widened the scope of mutual cover for 2012/13 to offer owner and charterer members optional cover for additional war, civil war and piracy perils to enhance the long list of insured perils.
The Strike Club’s recently published annual report reiterates that all operators are exposed to financial losses caused by delays. This exposure depends on the type of activity (charterer or owner), and the contractual basis on which the vessel is operated.
Owner-operators and charterers take out Class I & II cover because many shore-based delays, such as strikes, war, civil war, riots, fire, earthquake, port closures, obstruction, imposition of export controls, etc., can destroy any margin for owner-operators or for charterers.
During a delay caused by a ship-related event, a time-charterer can often stop the payment of charter hire, so the Class III cover is better suited for owners or bareboat charterers.
In effect, mutual delay insurance provides cost-effective protection for losses caused by delays, with very low deductibles.
For the 2011/12 policy year, the annual report records that mutual delay claims were topped by closure of port or sea lane (19.3%), followed by collision (15.2%), port workers’ strikes (14.5%), machinery damage (12.6%), stevedores’ strikes (9.7%) and general strikes (7.1%).
During the same year, vessels under the flags of 84 states were entered in the mutual classes, with 2, 500 vessels in Classes l and ll (representing 100m dwt) and 1, 400 vessels in Class lll (45m dwt). For war risks, the club covered 900 vessels with an aggregate insured value of $22.5bn. For loss of earnings, 600 vessels were insured for risks totalling $600m.
The Strike Club has a Standard & Poor’s rating of BBB+ with stable outlook. The club’s 2011/12 premium income was $50m, with Europecontinuing to represent the largest proportion at around 40%.
MUTUAL DELAY INSURANCE
- Classes l & ll cover a ship during or following delays caused by a wide variety of onshore incidents such as strikes (either at the port or elsewhere in the cargo supply chain), war, civil war, riots, fire, earthquake, port closure, obstruction, imposition of export controls, etc.
- Class III covers the costs of delays resulting from a wide variety of onboard incidents, such as war, civil war, piracy, kidnap, ransom, officer or crew strikes, collision, grounding, drugs on board, stowaways, machinery damage etc., leading to a ship going off-hire
FIXED-PREMIUM BESPOKE DELAY RISKS COVER
- The club now offers bespoke cover for other delay risks in excess of, or outside, the mutual rules, for example a delay up to 180 days, plus expenses, caused by discovery of drugs or contraband
FIXED-PREMIUM LOSS OF EARNINGS COVER
- US$3.375m limit each incident
- Cover on terms to meet charterers’ particular requirements
FIXED-PREMIUM WAR RISKS COVER
- US$200m limit each incident
- Cover for owners and for charterers, with terms tailored to meet individual requirements