The Strike Club, the market leader for delay insurance for the marine trades, reports a strong start to its new policy year that commenced on February 1, with continuing demand for its mutual entries and fixed-premium products covering war risks, loss of earnings and profit protection for time-charterers.
Indeed, when the club’s directors met recently in Hong Kong they noted a very encouraging renewal rate of 99% among mutual members (by premium) for the 2014/15 year.
Further, despite the challenging trading environment, the club continues to maintain its reserves, on a combined basis, at $35m. And the club retains its S&P rating of BBB+ with stable outlook.
In Hong Kong, the directors reviewed the future structure of the club in view of the increasing EU insurance regulatory climate under Solvency ll (now delayed until 2016). It was decided in principle to obtain a licence for a new mutual located in the UK to enable the transfer of the European business currently conducted by The Shipowners’ Mutual Strike Insurance Association Europe to the new UK mutual. The directors will take a final decision in due course so that detailed proposals can be put to members.
During 2013 and into the first months of 2014, the continuing fragility of the geopolitical and economic landscape has put further pressure on ship operators trying to trade vessels at a profit against a background of freight markets which remain stubbornly sluggish.
The club points to the insidious effects of strikes and other delay incidents, whether shore or ship related, bringing uncertainty, legal actions, cancellation of contracts, and severe disruption to sailing schedules.
Bill Milligan, chairman and chief executive of S.C. Management, says that extremely damaging labour strike action continues to occur in various parts of the world, hitting shipowners and charterers.
Some of the worst trouble spots for delays have been all too familiar. For instance, this year many strikes have erupted in South America, affecting numerous vessels entered in the club and producing a large number of claims, as well as recurring problems on the US west coast and a fragile labour situation on the east coast. The Middle East continues to present considerable risks, said Mr Milligan, while the Ukraine situation is another pressure point.
“And now in China we are hearing reports about a significant rise in labour militancy, fuelled by higher living costs and a decline in the working population from the 2011 peak, ” added Mr Milligan.
On a more upbeat note, Mr Milligan states: “The club has developed and grown over 56 years to its present position as the world’s largest mutual insurer of marine strike and delay risks with the gradual introduction of several carefully assessed product innovations.
“The latest product, launched late in 2013, provides fixed-premium profit protection for time-charterers. It covers financial losses resulting from cancellation of charters following total losses or constructive total losses, by insuring the total expected profit between hire receivable and hire payable. We will continue to explore possibilities to expand our product range to meet members’ needs.”
For Classes l and ll (shore-related risks), claims are now almost all settled for the 2012/13 policy year, and the directors have levied a closing call of 20%. In spite of a number of claims this year for the 2013/14 year, the release call is maintained at 30%. The new policy year has begun in line with recent trends, and the release call remains at 30%.
For Class lll (ship-related risks), there is a closing call of 20% for 2012/13, while a call of 30% is maintained for 2013/14. Some significant claims have been submitted for the new policy year but the release call remains at 30%.
The club offers ‘one stop shop’ fixed-premium war risks cover to owners and charterers, with a limit up to $200m, combining traditional hull and machinery risks with tailored extensions as required; for example, loss of hire due to piracy even in the absence of a H/M incident, or charterers’ loss of bunkers resulting from a hijacking etc.
Cover is up to $4m for loss of earnings, using standard market wordings.
Tailored delay is offered for longer periods than those covered by the mutual rules, such as delays up to 180 days, plus expenses, caused by discovery of drugs or contraband, as well as for delay risks outside the mutual rules.
Finally, there is profit protection for time-charterers as detailed above.