Saga facility seeks to transform marine hull market by offering special terms for older tonnage, By James Brewer
As the renewals season for much of the world’s fleet approaches, interest is growing in a new marine hull insurance facility specially targeted at older ships. The venture is offering what it calls a “seasoned approach for seasoned vessels.”
It is being branded as the Saga facility – echoing the name of the UK-based personal insurance and services group Saga for people of 50 and over – and is dedicated to ships of 20 years and over.
The insurance partnership created for this significant sector of the market involves Astra Insurance of Romania, underwriting agent JLJ Maritime SA of Athens, and Qatar Re Zürich branch. It comprises two regional, all-risk hull and machinery insurance facilities: under the name Zing for Asian tonnage and Nautilus for European tonnage.
Almost half of the global fleet of ocean shipping, some 38, 000 units (48%) – were built before 1993. Asian-controlled tonnage makes up around 40% of the international fleet; and Greek- controlled tonnage represents 40% of European tonnage.
The Saga format sees hulls are underwritten on a 100% basis, with capacity of $7.5m per incident. Jonathan Jones, head of JLJ Maritime, said: “We are the only facility quoting all-risk cover for these older vessels, although with restricted conditions. We will pay for the survey of vessels submitted and approved for coverage, whereas normally underwriters will want the survey done at owner’s cost. The cost of the survey will be borne by underwriters. We believe that the key factor in shipping is the quality of fleet management, and therefore just because the ship is old, it does not mean it is a bad risk.”
Mr Jones said that early reaction to the new facility, launched in May 2014 with conditions based on the International Hull Clauses, was positive. “Many people in the market think that what we are doing is innovative.”
He said that it was well known that older motor cars which are properly maintained, serviced and driven with care will produce fewer accidents than a brand new sports car driven by an uncaring, unthinking young driver. The same may be said for ships.
“While it is true that newer vessels generally experience a lower incidence of loss than older vessels, at the same time newer vessels have both substantially higher sums insured but with currently extremely modest rates.”
Casualties involving newer vessels often result in costly repairs or claims, said Mr Jones. In the most high profile case, that of the cruise ship Costa Concordia, the insured losses swallowed up the equivalent of many years of premiums.
“Therefore, we expect that the older vessel sector will produce better risk/reward ratios, when underwriting considerations are coupled with pro-active claims management.”
Underwriters offering the Zing and Nautilus products submit a questionnaire to potential assureds, aimed at gaining a better understanding of the ethos of their management and preparing a pro-active approach to claims and the promotion of alternative dispute resolution.
The twin-region approach of the facility is a way of developing strong relations with local surveyors, salvors, and ship repair yards. Class-approved reconditioned parts will be sourced when appropriate to keep down the cost of repairs.
Surveyors will be encouraged to use thermography as part of risk management procedure, to minimise the possibilities of disputes over wear and tear of engines and equipment.
Astra is Romania’s largest insurance company, and features an experienced marine department.
Qatar Re Zürich branch is part of Qatar Insurance Corp and is rated A/stable by Standard & Poor’s and A (excellent) by AM Best . In a statement in mid-September, Qatar Re said it had made impressive progress towards developing into a global multi-line reinsurer, and was on track to generate gross premiums of around $550m for full-year 2014.
Mr Jones has been in marine insurance in 1974, when he joined the PW Hardy & Others syndicate at Lloyd’s, and in his subsequent career in Lime Street developed firm relationships with clients by travelling to meet them on their home ground, especially in Norway, Greece, Turkey and the Far East.
He led on the first Russian fleets to be insured in the international market after the collapse of the Soviet Union, and headed a team that created the first P&I facility in the Lloyd’s market. He is a strong supporter of th education and training of seafarers and is a trustee of Maritime London’s Officer Cadet Scholarship.
Deputy managing director at JLJ Maritime is Janna Kochkina, a former managing director of the marine hull and P&I department of Ingosstrakh, Moscow, which she had joined as a typist. She moved to another top Russian company, Rosgosstrakh, where she developed a P&I facility for domestic and international shipowners, and puts to good use at JLJ Maritime her knowledge of the Russian and other markets.
Claims director at JLJ Maritime, Paul Robson, is a key figure in the new facility. He is greatly experienced in London, European and Far East markets, in both hull and cargo claims.